The RRSP contribution deadline for the 2016 tax year is March 1. If you miss the deadline, you’ll lose out on a tax break and won’t have the opportunity for your money to grow tax-free.
But all is not lost if you want to contribute to your RRSP this year. You have a couple options available if you plan on making a last-minute contribution.
Transfer funds—If you have money in a TFSA or a non-registered account, you can transfer the funds to an RRSP. It’s best to have all of your accounts with the same financial institution. Otherwise, you may be charged for transferring your funds from one institution to another.
RRSP loan—The other option is to get an RRSP loan. Your financial institution will likely be more than willing to lend you money because it’ll earn interest on the loan. But this is only something you should consider if it makes sense and not because you’re being pressured into getting a loan by your institution or financial advisor.
If neither of those two options work, don’t let history repeat itself in 2018. You should begin planning ahead for the 2017 tax year. There are two things you can do right now.
Make regular contributions—Financial institutions allow you to contribute to your RRSP (or any other account) on a regular basis. Most pre-authorized contributions can be made weekly, biweekly, or monthly. Making these contributions will get your money working for you sooner and help you from rushing to make an RRSP contribution next year.
Contribute to a group RRSP—If you’re fortunate to work for a company that offers a group RRSP, you should join. Often, your employer will match your contributions up to a certain percentage of your salary, which is basically free money. You’ll contribute to your RRSP each time you get paid and you won’t be able to spend what you don’t have. Also, your contributions are made with pre-tax income, which reduces the amount of tax withheld when you’re paid. You get immediate tax relief and you don’t have to wait to receive a tax refund.
The bottom line
If you want to make an RRSP contribution for the 2016 tax year, consider using money saved in a high-interest savings account or TFSA. Alternatively, you can also get an RRSP loan. If those options don’t work, you can get a head start on the 2017 tax year by making contributions now so you don’t have the same problem in 2018. And if you have a group RRSP, use it so you can get a small instant tax refund each time you get paid.
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