RRSP – Only Two Days Left

We are in the final stretch of RRSP season.  Have you put your contributions away for this year?  Still not sure if you should put money into your TFSA or your RRSP?  Well fear not… I have the answer!

Once we are this close to the RRSP deadline you are in a tight spot to make the final decision about whether to make a contribution or not.

First things first… what is the RRSP deadline?  It’s the last day you can put money into your RRSP’s and still use it to reduce your taxes for the previous tax year (in other words Feb 29^th is the last day you can contribute to you RRSP and still claim the deduction on your 2011 taxes).

Ok, so you have some money in your bank account and you need to know how much to put in to your RRSP?  Well here is a similar process that I go through with clients.

Take their last pay stub from 2011, and go to http://www.taxtips.ca/calculators/taxcalculator.htm .  Input the information on the proper lines and look at the bottom to see if you have a positive number or a negative number.  Although this is only a rough calculation it will give you a ball park answer about whether you should expect to owe money or get money back.  From here you will have a few options.

1. You do not owe money, and you don’t have an adequate amount of money in your emergency reserve (Tax Free Savings Account (TFSA)) – Put your spare money in your TFSA in a conservative investment.
2. You do not owe money but you have a good sized emergency reserve – Put the money in your RRSP.  Take advantage of the tax credit as well as the tax deferred growth for years to come.
3. You have to pay a tax bill.  Here is where you should play around and see how much of an RRSP contribution it would take to eliminate your balance owing (you can do this on the calculator).  If you can afford to put that much into your RRSP… do it!  Then you are saving for your future AND eliminating a tax bill.  If you can’t, come to a happy medium.
4. What if you don’t fall into one of these categories?  Contact a professional.  I’d like to offer my assistance if you are in Greater Vancouver (Langley – North Vancouver).  But remember, time is running out!  Call me now if you have any questions.  I’d love to help.   Travis Strain – 604-308-6030.