Stop waiting for RRSP season! Contribute already, eh!

I know, we are a society of procrastinators.  We put things off until the very last minute.  I’m not innocent.  I avoid cleaning until my home becomes a sty.  I’m the world’s worst studier, and despite good intentions, have never been able to evolve from being a crammer.  It happens, it’s human nature, so there.

Where procrastination needs to be abolished is when it comes to making Registered Retirement Savings Plan (RRSP) contributions.  We forget, we put it off, but what are we waiting for?  Just write the cheque already!

You likely already know that when it comes to RRSP contributions for the current taxation year, the government allows for “first 60 days” contributions.  This means that as long as the money is in your RRSP account by February 29th, 2012, you are able to apply the resulting tax deduction to your 2011 income tax.  The first two months of the year is what is referred to as “RRSP Season”.  For those in the industry, it’s a chaotic time.  As an investor, I do love this extra bit of time to shove more money in my RRSP to reduce my taxes, but I’ve been contributing to my RRSP all year.

If you really enjoy the following, keep putting your RRSP contribution off until the last minute:

• Long lines at your financial institution

• Potentially not being able to book an appointment with your financial advisor because he or she is THAT busy

• Forgoing potential return within your RRSP account because the money is just sitting in your chequing account

• Possibly missing the boat altogether and leaving more of your money in the government’s hands

The 'stache has spoken. Get on that RRSP contribution!

Don’t worry, if you are like me and your memory is waning, there’s a solution!  It’s called “Pre-Authorized Chequing (PAC)” or “Pre-Authorized Debit (PAD)”.  This takes the guess work and recall out of the equation.  Instead of trying to remember to make your RRSP contribution, why not make one every month, automatically?

Personally, I make an RRSP contribution with every paycheque.  My RRSP provider debits my chequing account for a pre-set amount of money, and invests it with pre-set instructions.  I don’t have to do anything except make sure I have money in my chequing account to be drawn from.  In timing these pre-set debits with my paycheques, this isn’t difficult.

Not only does this buffer my terrible memory, but I’m also able to take advantage of “Dollar-Cost Averaging”.  Dollar-Cost Averaging is just a fancy term for spreading your risk by making incremental investments over a duration of time.  The theory is that it spreads your risk out because you aren’t committing such a large amount of money to certain investments at a single point in time.  Buying $100 of an investment every 2 weeks is much less risky than buying $2,400 of the same investment at once.

If you’re still the “traditional” type and only want to contribute once a year, please, do it now.  It will save you a world of pain in RRSP season and will get your money working for you, today.  You’ll be thanking me while playing shuffle board down in your Florida retirement community years from today.