I'm not sure when it happened, but sometime in the last 60 years, the two months between Christmas and March 1st have become RRSP Season. What does that mean? Is it like hunting and it's the only time you can do it or is it more like sweater season where it's suggested you bundle up?
I really dislike the fact that mainstream media has picked up on this wonderful phrase and ran with it like [insert famous football runner guy here]. Financial institutions have jumped on the bandwagon too. Just look at all the "special" rates that pop up in January?
1.50% interest to 3 months
6 months fees waived on new deposits
None of these are deals. The marketing machines at these companies know the psychology of a deadline; the more scarce something is (in this case, time) the more likely someone is going to act on a stimulus. A very large amount of money flows into the financial world in these two months but my question is, where is it all coming from? There is no way that all these people had this much money just sitting around.
Enter RRSP loans and borrowing to invest, otherwise known as DEBT. To me, this is ridiculous. Having an entire year to do something about your RRSP only to wait until the last minute. This is the reason why I strongly encourage my clients to start an automatic contribution to their RRSP every month, or twice a month. Missing a few hundred dollars from your account each month doesn't hurt as much as having to borrow a few thousand in February. Scientific fact!
Not sure how much you need to add each month to maximize your tax refund? Call my office and we'll set up a time to figure it out together.
Kenneth Coombs CFP CHS RRC
Ken has worked in the financial services industry since 2005, is a Registered Retirement Consultant and a Certified Financial Planner. Ken has written financial planning columns and has been a guest in financial print, radio, and podcast programs.