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MONEY$TYLE: RRSP Contribution’s Done. Now What?

You scrambled to make your RRSP contribution before the deadline…but you’re not done yet…

So you’ve been on the ball this year. You did your research about the benefits of RRSP contributions and you got it done…before the deadline! Now what? For starters, try to make sure you haven’t made one of these common contribution mistakes.

Is it invested?
During the rush to make the deposit and obtain the tax receipt, it is not uncommon for clients to delay making an informed investment decision and instead just leave cash in the RRSP account—which doesn’t give you the maximum benefits on growth. Yes, you still benefit from the tax deduction against your income; however, the other benefit of the RRSP is that you pay no taxes on dividends, interest or capital gains you generate in the account until you start to withdraw.

Consider future tax implications
For most people, the main motivator for RRSP contributions is the tax savings it allows today against your most recent tax year, by allowing a deduction against your taxable income for that year. But I recommend that you take the time to consider not only today’s tax impact but also the long-term impact when you start to draw from your RRSP nest egg, particularly if you have a spouse. Consider the fact that if a couple earns $100,000 and $50,000 respectively, their total income tax paid is higher than if they each earned $75,000 each, although their total household income is the same. The norm is for the person with the higher income to accumulate a larger RRSP savings in their name; however, you can also strategically use a spousal RRSP account, which allows the high-income earner to get the tax receipt while putting the savings in their partner’s name.

Estate planning
An RRSP account allows you to designate a bene ciary, which could be an individual, a number of persons with percentages allocated, or your estate. Many people don’t review their designation when they purchase the RRSP, making an update only when they think it necessary. But the timing doesn’t always work: I have seen a situation where the bene ciary for a client’s RRSP was their ex-spouse—whom they had divorced years ago. It wasn’t the client’s intention to bene t the ex-spouse and it wasn’t required by any court ruling; it was simple negligence on the client’s part.

Planning ahead
If you’ve covered all the bases discussed above, then your sights may be set on planning for the next tax year. It is possible to have an automatic monthly transfer made to your RRSP, which keeps you disciplined and gets your money invested immediately. In order to have flexibility (in case you end up needing this money for an emergency), I recommend that you make your automatic monthly investment to a Tax-Free Savings Account and then at tax time (around January or February), you can transfer in kind whatever lump sum you want to the RRSP. This way, you don’t miss out on the investment gains—tax sheltering—but you also don’t commit to setting your money in an RRSP too soon, before you know your actual tax situation when the year is complete.

Finally, remember to check in with your nancial advisor to get the right advice that suits your nancial needs.

AL RAMSAY is TD Bank Group’s regional manager, LGBTA Business Development, and leads a team of expert advisors dedicated to serving the LGBTA community. For more information or to book a meeting, he can be reached at or follow him on Twitter at @AlRamsay_TD.
ORLANDO LOPEZ, TD Wealth Financial Planner, is a member of Al’s team of expert advisors who support the LGBT community.

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