RRSP deadline is approaching!
While you’ve not yet been deluged with commercials reminding you that the deadline for your 2014 RRSP contribution is near, in the interest of good financial planning, let’s not wait ‘til the absolute last minute.
Fast Facts
For the 2014 tax year, the deadline is March 2, 2015. The maximum RRSP contribution limit for 2014 is $24,270 (however, if you have unused contribution room, you can carry that forward and make additional contributions).
For more details and fast facts, click here.
Retirement? But it’s so far away!
While retirement may seem like a distant dream, and that there are other, more immediate financial goals in your future, you should still contribute to your RRSP.
Here’s why:
Power of time
Contributing to your RRSP addresses numerous financial goals at once. Firstly, you get to start building a nest egg for your retirement, and are leveraging the power of time to help grow your investment pool. There are different scenarios depending on what you invest in, but in most cases, simply letting your money grow with interest, dividends, or through capital gains will let your initial deposit increase substantially over time. In many cases, a single amount now, left to grow, will grow to a greater amount than if you waited several years and made more contributions. This of course, depends on your individual circumstance and a number of other variables (which is why it makes sense to visit your banker or financial advisor).
Immediate gains
Did I mention that you get a tax credit, which could translate into a refund? Like right now! (well, when you file your taxes). You can either this amount to accumulate a tidy refund which can be used for other purposes in your short term goals (pay off debts, invest in your house, pay for your summer vacation, use for emergency fund savings) or if you owe a lot in taxes, this will reduce how much you owe.
Other RRSP uses
Your RRSP is not just for your retirement. If you are a first-time homebuyer, you can withdraw from your RRSP to use funds for your down payment. Going back to school? You can use your RRSP for your tuition through the LLP (Lifelong Learning Plan). There are rules and repayment obligations around these, so check it out before you proceed.