Along with marking the start of the new year, the month of January is what some banks like to refer to as registered retirement savings plan season.
But according to Tayona Johnas, vice-president of strategic development and wealth management at Sunrise Credit Union, RRSPs shouldn’t have their own time of year.
"The so-called RRSP season is really for those people who leave planning to the last minute and find themselves in a scramble to catch up," Johnas said. "Many people who wait until the last minute are often those same ones that use their tax refund to spend on things they don’t need, like a new television set or granite countertops. Smart planning starts with regular deposits, every payday through pre-authorized transfers."
Instead of thinking about what you want to have set aside for your retirement last minute, Johnas suggests doing something useful with your tax refund, like investing in your future.
"Unfortunately, many people see their tax refund as free money from the government, they don’t recognize it as their own and continue making poor financial decisions."
For Johnas, planning for your retirement starts with putting yourself in a good financial position for the future, right now. She suggests maxing out your RRSP contributions, topping up your tax-free savings account (TFSA) and having an emergency cash fund that will cover up to six months worth of living expenses.
When it comes to mortgages, she suggests trying to apply a minimum of 10 per cent to your mortgage principle annually to cut your mortgage interest costs by up to 50 per cent.
But when it comes to RRSPs, although it’s common to not know where to begin, the best place to start is to find out what they are and what they can do for you in the future.
"A registered retirement savings plan is a government approved plan through which you save money for your retirement years," said Lynn Nunn, deposit and member services administrator for Sunrise Credit Union in Brandon. "Your contributions, within limits are tax deductible and the income earned is tax sheltered."
Nunn said one of the easiest ways to contribute to an RRSP is through monthly pre-authorized transfers.
"This enables you to save part of each paycheque," she said. "Contributions can be made at any time of the year and some people even borrow to make their deposit."
Instead of wondering when the best time to start investing in an RRSP is, Nunn said it’s never too early to start.
"Our best advice is to always start early, it’s never too late, so start saving today," she said. "Save as much as you can afford and make monthly deposits to registered funds."
Another common question brought up by first-time RRSP purchasers has to do with rates, but the answer isn’t always as straightforward as one number.
"I like to have conversations around when they plan to retire, how much risk they were willing to take on, have they heard of laddering their RSP terms to take advantage of higher rates of return," she said. "If a person is retiring or needs the funds in two years, then it doesn’t matter what our five-year rate is or that our five-year rate is not as high as someone else’s. I found after a conversation of time frames came into play, we knew how long to invest the funds and what rate corresponded with that."
So instead of worrying about when and where you should start when it comes to your own RRSP, it’s more important to remember that there is always someone who can help.
"Work with your adviser so they can assist you with the best investment options to meet your needs."