Tips for getting the most from your RRSPs

Missing the RRSP deadline for making your maximum 2012 contribution can be very costly...

Yes, it’s true that investments held within a Registered Retirement Savings Plan (RRSP) is the best tax-deferred, income-building way for most Canadians to save for retirement.

It is similarly true that missing the RRSP deadline for making your maximum 2012 contribution can be very costly.

• If you are in a high income bracket this year but will have a lower marginal tax rate in a future year, your tax benefit from that future RRSP contribution will also be lower.

• The additional tax refund you didn’t get because you didn’t contribute this year is not available to make investments or pay down non-deductible debt.

On the other hand, if you do make your max RRSP contribution and do get an additional refund, you should consider investments appropriate to your diversification requirements and tolerance for risk, rather than depositing your refund into a savings account.

• The government does not allow you to make RRSP contributions after the end of the year that you turn age 71. So, if you (or your spouse) are turning 71 in 2013, you should consider making an RRSP contribution by Dec. 31, 2013, or you’ll lose that tax-saving opportunity.

• If you are making a contribution to a spousal RRSP, do it before Dec. 31 each year to reduce the time before it can be withdrawn. Under attribution rules, a contribution to a spousal RRSP must stay in the RRSP for three calendar years before it is withdrawn, or the withdrawal will be attributed back to the contributor.

• If you are claiming a spousal RRSP deduction for a deceased spouse or common law partner, the contribution to the spousal RRSP must be made in the year of death or during the first 60 days after the end of that year or the opportunity for this deduction will be lost.

The deadline for making RRSP contributions for the 2012 tax year is March 1, 2013. Don’t miss it and don’t miss out on other tax-saving, income-building opportunities — talk to your professional adviser soon.

• • •

Breaking news! The B.C. government has just announced a new Training and Education Savings Grant — a $1,200 RESP grant to all eligible six-year-olds in the province!

J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc. His column appears every Wednesday.

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