Investment News - January 21, 2008

Your RRSP Wake-up Call

February 29, 2008 is Canadian RRSP Deadline for 2007 Tax Year

It’s become an annual retirement planning ritual. Every February, last minute shoppers line up at the doors of their financial institution to make their annual RRSP contributions. It may be human nature to put things off until the last minute, but life is usually a lot easier if you get an early start on something, particularly your RRSP contribution.

“Contributing early in the tax year can translate in thousands of dollars………”

Rather than waiting until the last few weeks to contribute to your RRSP, it makes much more sense to make your contribution early in the year. The best strategy is to make your RRSP contribution on January 1 for the current tax year, rather than waiting until the February 29 deadline the following year. By doing this, you’ll have an extra 14 months of tax-free accumulation in your RRSP. That extra time can translate into thousands of dollars more in tax-deferred retirement income over the life of your plan.

For example, Patrick, a 30 year old- just starting out- who contributes $3,500 to his RRSP at the end of each February following the tax year, would accumulate $588,706 by age 65. (Assuming 8% compound average annual rate of return). Patrick is waiting Feb. 29, 2008 to contribute for the 2007 tax year.

However, if Patrick had made that first contributions at the beginning of the tax year on

January 1, 2007 rather than waiting until the end of February 2008, he would get a tax-sheltered retirement portfolio of $651,358 by age 65. (Assuming the same 8% compound average annual rate of return).

The 14 months difference on that ONE contribution represents a wealth accumulation difference of $62,652 over 35 years.

Call Grandview Credit Union today and make an appointment to discuss the benefits of contributing early to your RRSP or make your 2008 RRSP contribution now instead of February 2009!

See our website at www.grandviewcu.ca for details and a chance to WIN at “THE PHRASE THAT PAYS”.

mailto:info@grandviewcu.mb.ca