3 Tips For The RRSP Procrastinator

The RRSP deadline for making a RRSP contribution is soon to be upon us – in fact, February 29 is your last day. You have less than a week and less than 4 working days. If you are one of the procrastinator about to make a contributions, here are some tips that you may want to consider.

1. Don’t Rush To Invest

There is no need to pick an investment at this point. All you need is the contribution for your tax deduction. For that purpose, just transfer the desired amount in your self-directed RRSP. If you don’t have a self-directed, talk to your financial institution about simply making a cash contribution without any strings attached when it’s time to move your contribution to where you want it.

2. Contribute To Avoid Owing The Tax Man

If you know that you may owe taxes, you can always consider adding to your RRSP to bring your taxes to zero. Again, no need to commit to an investment, simply make a cash contribution. You can then look at maximizing your RRSP portfolio by adding your refund back into your RRSP.

3. Consider Optimizing Your RRSP

The concept is simple, you borrow what you need so that your tax refund covers the loan. Turbo Tax (and possibly other tax software) even has this ‘RRSP Optimizing‘ concept built in. It will show you how much you should add to your RRSP so that your refund matches your loan. I caution you that you really must pay back the loan as soon as you get your refund back, otherwise it becomes dangerous if you keep your loan around. The interest on an RRSP loan is not tax deductible either unlike an investment loan.

Make The Most Out Of The RRSP Season

For some, the procrastination might be due to the late delivery of the forms you need to estimate your taxes and for others, well, it’s just procrastination. Either way, you only have a short time to make the most out of it.

I used to be ready with all my taxes well before the end of February. In fact, as soon as Quick Tax (now Turbo Tax) was available, I had my taxes done. Now, it’s much more complicated and I have many tax forms that arrive in mid-April which means that I submit my taxes only then. I rushed once and I ended up filing 3 times to update it.

A Word To The Wise

Setup regular contributions to cover your expected needs. That way, you’ll avoid all the RRSP season madness

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