RRSP Seasonal Insanity

Person making a a gesture with two hands sheltering over a pile of coins with a a single stem of plant leaves in the centre

It’s the beginning of February and we are now being bombarded by TV, radio and social media advertising telling us to it’s time to contribute to our RRSPs. For many of us, the RRSP season concludes with a last minute dash to make a contribution for the year. While investing in your RRSP is certainly worthwhile, the rushing and last minute decision making are not necessary. In order to change this, the planning must begin as soon as the last RRSP season finishes.

Did you realize that this last minute approach to retirement saving and investing means that your nest egg will likely be smaller than if there was proper planning of regular monthly contributions? Here’s why…

What is the difference to an investor between depositing $24,000 per year at the end of February versus $2,000 at the beginning of every month when calculated over a 20 year period? In both scenarios the investor has contributed $480,000 (20x$24,000 or 240x$2,000), so the amount that has flowed into the RRSP is identical; however, the final result is quite different.

Beginning of Month Deposit

Annual Year-end Deposit

Deposit Amount



Annual Return



Value after 20 years





As the above table shows, making regular monthly deposits captures the power of compounding over many years. Contributing to your RRSP on a monthly basis using pre-authorized contributions, which will be deducted automatically from your bank account, is the perfect way to budget for retirement savings.

One risk of contributing only once per year is that you may be tempted to spend part or even all of the accumulated contribution on something new and shiny. You may justify this expenditure by saying you will make it up in the future, but the missed growth is gone forever.

One of the first pieces of information, and the most important, is to determine your available RRSP contribution room. This can be found on your most recent notice of assessment, which you will receive several weeks after filing your tax return. Contribution room is 18% of your earned income, up to a maximum of $25,370 for the 2016 tax year; any contribution room you don’t use each year is carried forward, which means you could have available contribution room much higher than the annual limit.

A monthly savings plan does not need to be only restricted to your RRSP, but can also include your TFSA and non-registered accounts. The following table may be useful in helping to budget the contribution amount and the allocation between your various accounts.

Contribution $






Your Spouse


Setting up a regular savings plan as part of receiving a regular paycheque is simple and easy. The effects of compounding will grow your savings over time and you will likely be surprised at the money you have saved without realizing it. Speak with your Wealth Consultant today about starting a regular RRSP contribution plan for 2017.

All examples are for illustrative purposes only and are not intended to provide individual financial, investment, tax, legal or accounting advice. This material is for general information and is subject to change without notice. Every effort has been made to compile this material from a reliable source. However, we cannot guarantee that information will be accurate, complete and current at all times. Before acting on any of the above, please make sure to see a financial professional for advice based on your personal circumstances.

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