RRSP Tax Tips

Our finance contributor Lesley Scorgie stopped by to share her five easy steps to a Registered Retirement Savings Plan (RRSP). Don’t let the word “retirement” fool you. RRSPs are a great tool savings tool while you’re working because you can deduct those savings from your taxes. Remember, you have until the end of February to make your contribution and have it go toward your 2010 tax return. 

Start with what you can save. You can start with just a dollar a day and end up contributing $365 into an RRSP. Take a look at your budget and see what you can shave off. 

Make your contributions automatic.

Banks will allow you to set up your RRSP withdrawals to coincide with pay day so you’re never tempted to spend that money rather than save it.

Increase your contributions.

Don’t just stop at a dollar a day. You may get a pay raise or find an extra source of income. Put that money into an RRSP. The more you contribute, the more of your income you can shelter from the tax man.

Work with your employer.

Twenty minutes with your HR rep can lead to all kinds of free money. Some employers have programs where they will match or double your RRSP contributions. You can also ask your employer to put your annual bonus into your RRSP instead of adding it to your paycheque.

Know your limit.

You’re allowed to contribute up to 18% of your income to your RRSP, but not everyone can hit that limit. The good news is the unused amount can be carried over year to year so you actually have buffer room in years where you’ve got tons of money to put away in your savings.