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Missed the RRSP Deadline? It's Not Too Late!

March 3, 2014
3 mins
A couple lean in to look at something on a laptop

An increasing number of Canadians (roughly 64%) have an RRSP, according to a recent BMO Financial Group survey. It’s too bad so few of them actually made a contribution this year.

Missed RRSP Deadline More Prevalent

Paying down debt seems to be a bigger priority, according to early industry figures. And no wonder – as 2013 came to a close, the ratio of Canadian household debt to disposable income rose to 163.7%, a new record.

Despite continued low interest rates, rising house prices are another likely culprit, as more and more Canadians pour their money into real estate rather than into their RRSPs. But that may not be the way to go for everybody, particularly if you're in a higher tax bracket.

Don’t Scrimp On Contributions

Skipping the RRSP means you're betting that the hot housing market doesn't falter and, despite many predictions to the contrary, keeps heading up for several years to come.

The truth is, most boomers wish they could go back in time and make RRSPs a more significant part of their retirement planning. Assuming you can adjust your money clock just a little bit, however, you can still get back on board.

First off, try to make your RRSP contributions at the beginning of the calendar year, instead of waiting until the March deadline. That gives you up to 14 extra months of tax-deferred growth each year.

Look Forward, Not Backward

The first business day of the year was Friday, Jan. 3. Not only could you have made an RRSP contribution for the 2013 tax year but also for the current year as well.

Granted, that's a lot of cash, but it's the best way to get as much money as possible working for you on a tax-deferred basis -- again providing you can use the tax deduction to the fullest.

But, since you weren't able to do that during the winter, you still have time to get a jump on things for 2014.

If you've had trouble putting money aside in the past, consider a bit of forced savings. A little bit each month automatically deducted from your bank account can really help you kickstart your RRSP. For most people, it's a lot easier to put $350 a month into an RRSP than to come up with $4,200 once a year.

Check Out Employer-Sponsored Plans

In many instances, your employer may be willing to help you out here as well -- particularly if it doesn't offer the type of guaranteed pensions that most public sector workers enjoy.

According to various studies, less than half of those eligible for employer-sponsored RRSP programs actually take advantage of them. And that's a big mistake.

Since many of these plans include company matching of employee contributions, this means you're leaving money (as much as the 2% raise you're probably not going to get) on the table each year that you don't participate.

Think About Borrowing To Catch Up

If you've been investing on your own and have been lagging behind, now may also be the time to start using up that idle RRSP contribution room. You can go back 22 years to boost your savings.

There may even be merit in borrowing some of that money. As a rule, if you can repay your RRSP loan within one year, borrowing can make sense. Your cost will be the interest you paid for one year. Your gain will be one year of tax-deferred growth, which could outweigh the debt cost over the long haul.

And, if you know you're getting a tax refund, you can reduce the cost of borrowing still by applying your tax refund directly to your outstanding loan principal.

Not sure where you stand? Check the Notice of Assessment you'll receive once you file your tax return next month. It'll update you on how much room you've been leaving behind.  

Gordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a consulting firm focusing on retirement readiness. Gordon was a columnist for the Globe & Mail and Morningstar for many years and is also currently a columnist for Investment Executive, Canada’s national newspaper for financial advisors.

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