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RRSP: Regular repeating stress point?

It's time to see RRSPs differently. Make more informed decisions about them with these helpful insights.

January 2021 ​ 2 min read

Every RRSP season, a lot of people find themselves with a decision to make.

They have a mortgage, some equity in their home, other debt, and unused contribution room in the RRSP and their TFSA. They also have an eerie feeling that they should be doing something before the RRSP deadline – hey, it’s a deadline! – but don’t know what.

Once you start contributing to an RRSP regularly, it can be easy to lose track of some of the details of how they work. Or your circumstances may have changed, but not your RRSP behaviour. Here are few things to keep in mind:

Why is “RRSP season” still a thing, anyway? Aren’t I supposed to contribute all year? 

Yes, but the first 60 days of each year are a magical time when you can claim your contributions against last year OR carry them forward to this year. For example, if your contributions would be enough to put you into a lower tax bracket, you could save more taxes if you split it over two years and stay in the higher bracket both years.

Should wedding vows mention RRSPs? 

Absolutely. If there’s a big difference between you and your spouse’s income, contributing RRSPs to whichever spouse has the higher income means greater savings for you as a couple. And at retirement, the lower-income spouse could pay less tax as money is taken out of your RRSP. Income splitting: it’s the one kind of splitting that keeps couples together.

Or should I just forget RRSPs and deal with debt or my mortgage? 

Debt has a bad name, and carries a stigma, and paying it off is never entirely wrong. But if you think of debt as a form of “negative investment,” getting rid of it first is not always the smartest thing to do. Is the cost of the debt greater than the potential return of investing that money elsewhere? With RRSPs it gets even more complicated, because you have to look ahead and try to predict what your tax rate will be after retirement.

Why does my head still hurt? 

As with most financial questions, the first part of every answer is “That depends…” So always remember that your most important financial planning tool may be a chair: RRSP season may be the best time each year to grab a chair and sit down with someone who can help.