Q – I am a procrastinator when it comes to contributing to my RRSPs. Every year, I make my contribution on the very last day. Do you have any tips so that I don’t find myself doing this again next year? – Lillian G., Winnipeg, Manitoba
A – I urge my clients to make frequent and regular RRSP contributions throughout the year, rather than a large lump sum on the very last allowable day for contributions. Not only is a systematic contribution plan easier on cash flow, but your money starts working and compounding that much sooner. It also reduces the risk of falling into the trap of trying to time the market (waiting for what you think is the “best” time to buy – you’ll be wrong more often than not) and the possibility that you invest everything right at the top of the market and then watch in dismay as your entire investment loses value.
I recommend you start off regularly investing small amounts, gradually increasing the amount as the years go on. Making larger contributions as your salary rises through the years is a great way to boost your RRSP savings. Preauthorized payment plans, through automatic payments from your paycheque or bank account, are an effective way to ensure you make regular contributions to your RRSP. A good rule of thumb to remember: Pay yourself first. – R.T.
Robyn Thompson, CFP, is the founder of Castlemark Wealth Management, a boutique financial advisory firm, specializing in customized financial, investment, insurance, and retirement planning. Phone 416-828-7159 or email today to rthompson@castlemarkwealth.com for a no-obligation, no-charge Castlemark Integrity Financial Planning consultation.
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The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.