Missed RRSP Deadline? What’s Next?

So you missed the RRSP deadline last week and are not sure what to do now? There is not much you can do for 2009 unfortunately, but you can learn from your mistakes and avoid them for 2010. Although RRSP contribution from this point on cannot be used to reduce taxes for 2009,  you can do a few things to prevent this from happening again.

First of all one important lesson should be taken from this: Do not leave RRSP contributions for the last minute. Often people ignore their RRSP contributions till the “RRSP Season” however I don’t believe there is such a thing as “RRSP season.” RRSP contribution and planning should be done throughout the year, not just a few months before the deadline. By contributing to an RRSP plan throughout the year, you can avoid the last minute scramble for cash.

Focus On Retirement

Although RRSP contribution gives Canadians a nice tax break, the primary purpose of the RRSP should not be tax reduction, rather it should be retirement planning. RRSP is a retirement vehicle and its purpose is to ensure you have sufficient funds in your retirement years to maintain your lifestyle. Often people make tax reduction the primary goal for their RRSP plan and investment a secondary goal. You should think investment first and tax shelter second.

Spousal Plans

Spousal RRSP plans can have many advantages; for example if you are in a higher tax bracket than your spouse you can benefit from spousal contribution. Consider contributing to a spousal RRSP plan, if you have any contribution room left, this way you will get the tax deduction while your wife will pay the tax when she withdraws the funds.

Free Money

Some employers offer RRSP matching programs, where you contribute to an employer sponsored RRSP plan and your employer will match it up to a certain limit. Usually you do not have a wide variety of investment options within these plans, but it’s free money from your employer so why leave it on the table?

Get Refunds Earlier

Set up a monthly contribution plan and get your employer to send a portion of your paycheque to your RRSP plan. In doing so your payroll department will make those contributions before taxing them so you’ll be getting the refund on them right away rather than months later. As a bonus you also benefit from compounding and will not have to scramble for cash last minute before the deadline.

Have you missed RRSP deadlines in the past, what have you learned from them? How do you ensure you do not miss the deadline?

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