Top 5 RRSP Tips

Planning ahead makes all the difference in your finances. The experts from G&F Financial Group have a few tips to get you started this RRSP season.

1. Start investing in an RRSP early, and put time to work for you. Take advantage of compounding rates of return rather than catching up later in life. The earlier you start, the more you have to gain. So make sure you start saving for retirement early in life – but remember – it’s never too late to start.

2. Contribute early in the year to maximize growth. You can contribute to your RRSP from January 1 of any calendar year until 60 days into the following year. If you have the money, make your contribution for the year as early as possible instead of waiting until the 60th day of the following year. Your plan will benefit from up to 14 extra months of tax-deferred compounded growth for every contribution.

3. Pay yourself first. Contribute regularly to your retirement through convenient, automatic withdrawals from your account. A Pre-Authorized Contribution or “PAC” Plan allows you to contribute as little as $50 weekly, monthly, or semi-annually – on your own terms. PAC Plans let you take advantage of dollar cost averaging to maximize your growth opportunities and reduce risk. Dollar cost averaging smooths out the volatility of your fund holdings because you buy more units when prices are lower and fewer when prices are higher.

4. Consider adding foreign content. Canada occupies a small part in the world markets. In fact, 98% of the world’s investment opportunities lie outside our borders. A geographically diversified portfolio can boost your potential returns and help reduce risk.

5. Contribute the maximum permitted. This allows you to take full advantage of the tax deduction from contributions and ensures that you‘re putting enough aside for a comfortable retirement.

RRSP QUICK FACTS

• The current RRSP contribution limit is 18% of your previous year’s “earned income” to a maximum of $21,000 for 2009, and $22,000 for 2010.

• Unused RRSP contribution room can be carried forward indefinitely. Check your Notice of Assessment from Canada Revenue Agency (CRA) for your total allowable contributions that can be carried forward.

• CRA carefully defines the term “earned income” for RRSP purposes. Among the items to be included are salary or wages, rental income, alimony received, net business income, and disability benefits paid by the Canada Pension Plan. It does not include investment income, retiring allowances or severance pay, taxable capital gains, or pension income.

With branches throughout Vancouver, Richmond, New Westminster, Surrey, Burnaby, and Port Coquitlam,
G&F Financial Group is a full service credit union offering banking services, expert financial planning, mortgages, and insurance. Whether you are looking for the first account for your toddler, a financial plan for your retirement or services for your small business, talk to us today for all your financial needs!
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