We’re getting mighty close to that part of the year when time and money start to dominate our thoughts.  The holiday season is coming and we need the time to shop and the money with which to shop.  Then, early in the new year, as tax deadlines loom, we need the time to prepare our income tax returns and the money to make a Registered Retirement Savings Plan (RRSP) contribution.  Trouble is, with time and money even harder to come by following the holiday season, many people will be shortchanging their tax breaks and retirement income by waiting until the last minute to make their RRSP contributions – or failing to do it at all because budgets can get really tight at that time of year.

For most Canadians, RRSPs are the best tax-sheltered savings-builders by far.  But, when you make your RRSP contribution in a lump sum in the final two weeks of February – as 90 per cent of Canadians do – you stand to lose a lot in future value. Here’s an example that illustrates why:

·         Suppose that each year, you invest $3,000 in your RRSP.

·         If you wait until the end of the year and invest your $3,000 all at once, in 30 years you’ll have a retirement nest egg of $408,923 (assuming an annual compound return of nine per cent).

·         BUT, if you set up a regular investment program and invest $250 on the first of every month, you’ll have $428,333 in your retirement piggy bank in 30 years.

·         Congratulations!  -- by investing monthly, you’ve made your retirement more financially comfortable by $19,410 without costing you an extra penny!

And here’s another good reason why a regular investment program makes such good sense:  It’s pretty much impossible for many of us to scrape together a lump sum of $3,000 or more every year at the tax deadline – after all, you’ve just paid those holiday bills.  But it’s much easier to set aside $250 a month, especially through a regular investment program that takes money directly out of your bank account.

The best time to start is right now.  And, if $250 a month is a bit rich for your budget at this time of year, you can start with $100 and work up as soon as your financial situation allows.

It doesn’t matter how much you contribute, the key is to contribute regularly and as early as possible.  That way, you’ll enjoy maximum tax benefits each year and enhance the potential for compound growth of your tax-deferred investment in the retirement of your dreams.

Of course, you’ll want the best possible returns for your additional RRSP contributions  – and for all your other investments, too.  And that’s where a financial advisor can really help.  Review your investment objectives with your advisor to get direction on the regular investment program and the right investments for your personal risk profile and long-term expectations. 

Less tax and more retirement income – what could be better! And all it takes is the discipline to save regularly and the knowledge – and help -- to invest wisely.

This column, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.