Late contributor
Staring down another the RRSP deadline and not sure what to do? Bruce Sellery’s last minute tips can help the even most dogged procrastinator.
Advertisement
Staring down another the RRSP deadline and not sure what to do? Bruce Sellery’s last minute tips can help the even most dogged procrastinator.
I know. I shouldn’t have left my RRSP contribution this late. But I did. Any last minute tips?
Answer
It seems Canada is filled with people like you: Thrill seekers who like to cut their deadlines close, or chronic procrastinators who never met a deadline they didn’t resist. I myself was good this year, but in the past have been known to curse the gods while waiting in line at the bank.
Oh well. The deadline for the 2011 tax year is Wednesday, February 29th 2012 at midnight. Here are a few simple steps to help you get your caboose moving and get you back on track before the cut-off date.
Determine how much to contribute
Pull out the Notice of Assessment the Canada Revenue Agency mailed to you after you filed your income taxes last year. It will tell you what your maximum contribution is. If you can’t find it, you can give them a call, social insurance number in hand. Just be sure to have your Sudoku at hand for the inevitable wait.
That said if you’re like most Canadians, you don’t really need to know your maximum contribution because you haven’t always maxed out your RRSP so you are at little risk of exceeding it. If that describes you, you’ll have more RRSP contribution room than you’ll be able to use this year, so the “how much” question will be determined by how much you can afford instead of how much you are allowed.
My advice on that front: Contribute as much as you can afford. The larger the RRSP contribution, the more tax you’ll be able to defer and therefore the bigger refund you’ll get, not to mention the more money you’ll have working to fund your retirement.
Find the money
Most people don’t have a few grand available for a last minute RRSP contribution. But you might have money in a tax-free savings account that you could use, or you might consider getting a loan. There are three basic types of loans: the “gross up”, the “top up” and the “catch up”. For more information on these loan types, check out this great MoneySense article to see if any of them work for you.
Another option is to borrow from an existing line of credit. The advantage to this approach is that it is super simple and you can pay the money back at your convenience. The con is also that you can pay the money back at your convenience. I kind of like the forced repayment plan that comes with an RRSP loan.
Make the transfer
You can run into your local financial institution and endure the lines. Or, if your accounts are linked online, you can do a super simple transfer.
It is important to remember that the deadline everyone is so breathless about is the contribution deadline. You just have to get the money into your RRSP account; you can choose what you invest that money in at a later date. Swing by the branch or go online again in a few weeks and figure that out. Right now, the focus is on getting the money in to your RRSP for tax deferral this tax year.
Avoid the last minute panic next year
There are two simple things that can make your life a lot easier when it comes to RRSPs:
In case you haven’t noticed, I’m a passionate believer in RRSPs for most people. So go on, get on with it.
***
Please send your money questions to Bruce Sellery at [email protected].
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email