RRSP deadline is approaching. Here’s what you do if you haven’t set money aside.

Deadlines! If you are anything like me and, I have to believe, the vast majority of the population, the mere mention of a deadline is enough to scare you into doing nothing. And actually, that is what the word was originally meant to have you do. This very dramatic word was first coined during the Civil War at the infamous Confederate Prison in Andersonville, Georgia. The ‘dead line’ was a small fence about 20 feet inside the main stockade wall. Anyone crossing or even touching this line thinking of freedom was shot dead without warning.

Not all deadlines are bad.

To add a little more drama to deadline all I need to do is combine it with other words like taxes, year ends, and RRSP’s. The good news is, while all deadlines have to be met, not all are bad. For example, provided you meet the upcoming 2015 RRSP contribution deadline of Monday February 29, 2016 you are actually going to save some of the taxes you paid in 2015.

So, if you were working in 2015 and paying taxes in a higher bracket than you expect to once retired, save tax dollars today and allow your RRSP investments to compound tax free between now and when you do retire. Even if you are just starting out, provided you do expect to continue earning more as your career advances, start your RRSP. Any deductions not taken advantage of can be carried forward to years when you are earning more and compounding started at a young age is invaluable. The government will also let you withdraw from your RRSP to put money into a down payment on your first home through the Home Buyers’ Plan.

Should I borrow to fund my RRSP?

The question that might arise is, ‘If I do not have the cash to buy my RRSP, should I borrow the money to do so?’ Rather than advise someone on this question I think I am better off letting you know my thinking for myself. My initial thought would be yes, I will borrow for my RRSP. I believe in RRSP’s and in budgeting, financial planning and taking a disciplined approach to looking after my financial well-being so, why not? Then reality would set in and I would have to ask, all of that being true, how come I wasn’t disciplined enough to save the money I needed in the first place? And then I would take heart knowing that it’s never too late to make a plan, become disciplined and get into some really sound financial habits. So in the end I personally, wouldn’t borrow. What I would do is heed my own advice, count this tax year as a lesson and immediately start contributing to my RRSP every month or paycheck for the current year. At the end of the year I would have the money I wanted in my RRSP initially, most of which was earning interest during the year anyway, none of which cost me interest and, best of all, I will have disciplined financial habits and plans which will serve me well the rest of my life.

Cheers! Financial health to all!

This article is supplied by Elizabeth O’Connor, an Investment Advisor with RBC Dominion Securities Inc. (Member–Canadian Investor Protection Fund). This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article.

Whether you are looking for a full time, full service financial advisor or seeking expert financial advice as a second opinion, call Elizabeth. With offices in Haliburton, Huntsville and Bracebridge, Elizabeth works closely with clients in cottage country from the lakes and surrounding towns.

Elizabeth O’Connor is an Investment Advisor with RBC Dominion Securities, which is a member of the Canadian Investor Protection Fund.

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