Now that December is over, it’s time for Canadians to start putting some thought into their RRSP contributions for 2014. However, don’t be in too much of a rush because the deadline isn’t until March 2, 2015, meaning that interested individuals still have lots of time to think through their choices so as to make the right ones for their particular circumstances.
Remember – with RRSPs as with other financial matters, a little research can make for a world of difference.
4 Things that You Should Do This RRSP Season
Here are 4 things that should be done when it comes to RRSPs:
- Given how popular the topic happens to be, it should come as no surprise to learn that there are a lot of sources of information out there, not all of which can be counted upon. This RRSP season, you need to make sure that the people you are listening are both knowledgeable and reliable. As a result, consult resources such as the CRA’s section on RRSPs instead of listening to your friend. Unless he or she has both the expertise and the experience, of course.
- If you have some time to spare, choose a self-directed RRSP rather than sinking your cash into GICs. This because GICs are low risk and thus low return, meaning that making other investments can result in much higher rates of return over time. More than enough to make up for the higher fees that come with a self-directed RRSP.
- That said, you need to remember that a RRSP is meant as a savings vehicle for retirement, meaning that you need to be protective of your hard-earned cash. Avoid taking on huge risks while chasing huge rates of return because even a single bad mistake can end up erasing the progress made over the course of decades.
- Even though you can have until the deadline to make a contribution, you should make it as soon as you have made your decision. After all, the time between your decision to contribute and your actual date of contribution is time that your cash could’ve been used to earn a return.
3 Things that You Shouldn’t Do This RRSP Season
In contrast, here are 3 things that shouldn’t be done when it comes to RRSPs:
- Don’t miss either the chance to make a contribution or the chance to take advantage of the refund that comes with it. If you are someone who finds it difficult to have sufficient cash on hand when it’s RRSP season, consider making a switch over to automatic contributions on a monthly basis.
- That said, never focus on RRSPs to the exclusion of all other concerns. For example, taking out a loan to make a RRSP contribution is a bad choice if the interest rates are higher than the rates of return. Likewise, paying down high-interest debt should come before contributing to a RRSP.
- You shouldn’t limit your investments to Canada. Even if you are risk-averse, other countries can provide a wealth of opportunities for better rates of return while still keeping risk low.
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Becoming informed is perhaps the single most important step when it comes to ensuring financial success. As a result, even though it can seem a bit daunting at time, you should get started on your RRSP research as soon as possible because March 2nd, 2015 isn’t that far off.