RRSPs: Not the Only Season for Your Money

March 1 is coming! It’s RRSP deadline time!

Every January and February, the financial services industry comes alive to encourage us to buy RRSPs (registered retirement savings plans) to fill up our contribution room for the previous tax year, but also to get our monetary houses in order.

As a result, RRSP season feels like back to school: everyone is suddenly inspired to do things right this time with the best tools and a new attitude.

But once in that chair at the bank or in the investment advisor’s office, we sometimes realize that once a year is just not often enough to organize our finances and make the most of our money.

Yes, the March 1 RRSP deadline is an important one. Your contributions lead to a tax rebate, and these plans encourage us to better save and plan for retirement.

But there’s more to managing money than tossing funds into RRSPs. By focusing our financial calendars on the late winter every year, we could be missing out on other important deadlines — and ways to save big bucks.

What about January 31? That’s the deadline for RESP (registered education savings plan) contributions. Saving for your children’s education has become increasingly important as tuition soars and the majority of jobs now require an undergraduate degree or college training.

If you don’t make all your contributions by the end of the year, you could miss out on some valuable government top-ups (although some let you make up contribution room later). The Canada Education Savings Grant and the Canada Learning Bond can earn you a few hundred dollars a year and can turn your small contributions into a healthy fund by the time your kids reach university or college age. (If you live in Alberta or Quebec, there are provincial programs that offer money or tax benefits that make education saving an even better deal.)

And how about TFSAs (tax free savings accounts)? This relatively new savings program allows you to contribute $5,000 annually in a registered account that’s entirely tax sheltered — you don’t pay tax on the principal or investment gains when you withdraw, and you can pull money out in the short term for renovations or to aid in an emergency, or save it all the way until retirement.

TFSAs follow a January 31 deadline. However, unused contribution room can be used in the following years, so if you didn’t max out in 2010 or in past years, you can still contribute now.

But TFSAs do have an important deadline: January 1. That’s the date you can start putting money back into your account if you made a withdrawal. So if you max out your TFSA early this year, for instance, but need $2000 this summer for a last-minute family vacation, you cannot put that money back in without going over your limit. But if you wait until the start of 2012, you can do that make-up payment on top of your $5,000 contribution room.

Also, don’t forget your mortgage anniversary. Most financial institutions let you make a large extra payment on your mortgage’s annual anniversary, often as much as 10% or 20% of the amount owed. That extra payment goes right towards principal — not a bad idea to take advantage of in anticipation of inevitably higher interest rates in coming years.

And just one more deadline: your tax return is due April 30. If you file late and you owe Revenue Canada tax money, you’ll get dinged 5% of what you owe, plus 1% more every month your return is late. And if the government owes you? Best file nice and early to get that rebate into your pocket so you can spend it on something special or use it as investment money.

Really, there’s nothing wrong with being an RRSP season fan. But this year, as you troll through your bank statements and do your math, keep in mind the bigger picture and how you can make your money work for you twelve months of the year.

Diane
Writer for RateSupermarket.ca

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