by Chad Fraser
We asked a certified financial planner to reveal the most common RRSP mistakes he sees – and to suggest simple tips to help steer clear of them.
It’s a time-honoured ritual: In the first 60 days of the year, people across Canada gather up as much spare cash as they can, then dash to contribute to their registered retirement savings plans (RRSP) before the annual deadline hits.
There’s good reason to circle the cut-off date (it falls on March 1 in 2018): It’s your last chance to make a contribution that’s deductible against your income – thereby lowering your tax bill – from the previous tax year.
That tax deduction is just one of many benefits RRSPs offer.
Another? Tax deferral: Investments you hold inside your RRSP grow tax-free. And when you start taking your money out, after you’ve retired and converted your plan to a registered retirement income fund (RRIF), or used it to purchase an annuity, it’s taxed at your rate at the time of withdrawal, which should be lower than in your working years.
Sounds simple, right?
The truth is people still make plenty of blunders with their RRSPs. Today we’ll help you avoid 5 of the most common ones, with tips from Cliff Steele, a certified financial planner with Sun Life Financial.1