Strategies to get the most out of your RRSP


It’s that time of year again; it is RRSP season. While RRSPs have a negative reputation amongst some Canadians, it is an excellent investment tool that can help just about every Canadian reach their goals. RRSPs are a tax deferral investment, which means contributions you make today will save you tax, but withdrawals in the future will be taxable. This trade-off is beneficial for most Canadians as we are more likely to earn a higher income while working compared to when we are retired.

While most contribute to an RRSP, what can we do to get the most out of the strategy? Whether your retirement is five years away or twenty-five years away, the best method for achieving any goal is to have a plan. The following RRSP strategies can help get you started.

Maximize your contribution to Maximize tax savings

In a perfect world, we would be able to fully maximize our contributions each year, therefore saving us the most taxes possible. However, we know life gets in the way. However, if cash flow is tight for a given year, you can always move money “in-kind” from another account to the RRSP for a contribution.

Contribute Early

Setting up a regular bi-weekly or monthly contribution that coincides with your pay will help you budget throughout the year and not leave you scrambling at the end of the year to contribute.

Give your savings a raise

As your income increases over your career, your RRSP savings rate should also increase. Ensuring you save a more significant amount each paycheck to ensure that your hard-earned money is being invested in you instead of spent frivolously.

Reinvest your Refund

After the hard work of saving throughout the year, you file your taxes and get the reward of money back from your tax return. Your next step should be to reinvest that money into your RRSP or TFSA the following year. That is unlocking the true potential of an RRSP, having your “tax savings” invested into a tax-free environment.

If you follow these four steps consistently for your remaining working years, you will be well on your way to a successful retirement. As mentioned, the best strategy to achieve a goal is to have a plan; it is our job to ensure you keep on plan.

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