Do you have a retirement deadline date in mind?  That glorious day when you’ll wave goodbye to the workaday world and stroll into the retirement years you’ve dreamt about for so long?  Well, whether that date is 25 years away, 5 years down the road, or just around the corner, there is one other deadline date you should pay strict attention to:  the deadline for making your 2004 RRSP contribution.  It’s coming up fast – but not too fast for you to take advantage of a few last-minute RRSP tips that will make your retirement more financially comfortable and maybe even allow you to move up your date with a new post-work life.

First, some RRSP deadline details:

·         This year’s contribution deadline is March 1, at 11:59 PM.

·         You may make a maximum contribution of 18 per cent of earned income (in respect to 2003) to a maximum of $15,500, minus your pension adjustment (if applicable). 

·         You’ll find your personal maximum allowable contribution on your most recent notice of assessment from the Canada Revenue Agency.

·         You can carry forward unused contribution room dating back to 1991.

·         You can fill your unused contribution room in a single year or over a number of years until the year you reach age 69.

And now for some tax-saving, tax-deferring, income-building RSP tips that can work for you:

·         Maximize this year’s RSP contribution.  Making your maximum allowable contribution each taxation year is the best strategy for immediate tax savings and to maximize potential long-term growth in your RRSP.

·         Maximize last year’s RSP contribution.  Catch up on your unused contribution room as quickly as possible for the same very good reasons: additional tax savings this year and increased potential RSP growth over time.

·         Borrowing can pay.  Taking out an RSP loan can be a smart way to maximize this year’s contribution or to catch up on your past contributions.  The money you borrow will generate an immediate tax break and add to your tax-deferred RSP growth potential.  The key is to get a loan at a low interest rate and pay it back as quickly as possible.  You can even use your extra tax savings to help pay off the loan.

·         Split with your spouse to save.  You can take advantage of a spousal RSP to generate retirement income that is subject to less tax.  This strategy works if your spouse’s income will be lower than yours over the next few years or in retirement. The plan is in your spouse’s name.  You can contribute to both your RSP and a spousal plan, but your total contribution can’t exceed your personal yearly contribution room.  Your spouse’s limit is unaffected by your contribution; he or she can still make a contribution up to his or her yearly maximum.

·         Consider an overcontribution.  You can contribute another $2,000 over your RRSP contribution limit without penalty.  Although you won’t get a tax break, you will enhance the benefit of compounding in a tax-deferred environment.  Think of it as an advance RSP contribution for a future year.  (A tax penalty applies to excess RSP contributions above $2,000.)

·         Diversify for better, more assured growth. Because the government caps the amount you can contribute to your RSP(s), it’s a good bet you’ll need additional income to fund the retirement of your dreams – and that’s where your non-registered investment portfolio comes in.  A well-balanced portfolio is based on an asset allocation plan that matches your risk profile and time horizon.  It should be diversified by investment type to offset the inevitable fluctuations in any single category.  And it should be rebalanced as required to maintain proper diversification while meeting your evolving financial needs. It’s also a sound strategy to invest the tax refunds generated from your RRSP contribution in the non-registered portion of your portfolio.

With the right RSP strategies you can save on taxes and retire with more.  A financial advisor can help make sure all your wealth-building strategies hit the bull’s eye on your life and retirement targets.