Below is an excellent article from the Financial Post, on what you can do to avoid the stress of trying to come up with a last-minute RRSP deposit.

Contributing to an RRSP doesn’t need to be traumatic. For many, simply changing their savings schedule can eliminate anxiety. However, although it might be easier to make smaller regular contributions throughout the year, most people still wait until the end of each year to make a lump sum payment.

Twelve smaller sums should not only be easier than finding one large sum right after holiday season expenses, but paying by automatic withdrawal also makes it difficult to skip a month for an impetuous purchase. The investor no longer frets about funding and the retirement savings discipline is reinforced.

Funding stress can be lowered further if the expected tax refund is received during the year. An employed investor can file a T1213 form, advising the CRA and the employer about their RRSP savings plan, and have tax deductions reduced at source to improve cash flow and make the payments easier.

Regular RRSP contributions are also beneficial from an investment perspective because investors can take advantage of dollar-cost averaging, buying more of their investments when prices are low and less when they are high. Investing equal dollar amounts over a set period of time generally achieves a lower average cost and the worry about buying shares amid market excursions is decreased.

It’s wise to think about the RRSP’s place among other priorities such as eliminating high-interest debt. If an RRSP’s benefits don’t support those goals it may need to wait. Acting on knowledge and planning is less stressful than making quick decisions and then wondering if they were right.

Thought should be given to the way RRSPs work. For investors in higher income tax brackets, RRSPs make sense because their tax deduction is likely at a higher marginal rate than it will be when withdrawals are taxed in retirement. For those in the early stages of a career with a low income, it may be better to accumulate RRSP headroom until their higher marginal tax rate is higher.

For the investor who has determined that an RRSP is the retirement vehicle they need, there is comfort in having the right strategy. It begins with examining the way in which the RRSP is invested. Generally speaking, bonds and other interest-bearing investments are best kept within an RRSP to remain tax sheltered while the most favorably taxed investments, such as those that produce capital gains and dividends, should be outside the RRSP.

Asset allocation relative to age is an important consideration. According to a BMO study, 60% of Canadian investors have specific time frames or target dates to reach their financial goals and 89% agree that it is important to hold investments that evolve over time, becoming less risky as key life events approach. While that may be what the majority believes, only 49% invest accordingly.

At any stage of life, retirement planning requires careful thinking. Don’t allow an investing process to impede your thought processes by introducing stress.

Kim Inglis is an investment advisor & portfolio manager with Canaccord Wealth Management, a division of Canaccord Genuity Corp.

Original article here.

Photo credit: “Confused Man” by SalFalko on Flickr

As the year draws to a close, it’s important to remember that RRSPs are still one of the best ways to invest and save. You won’t be taxed on the money you shelter in an RRSP until you take it out, and for 2012 you can put away as much as $22, 970. To help you get started, we’ve put together this nine point RRSP checklist for you:

1. If you haven’t started saving, start now. It’s never too late to invest in your future.
2. Invest early and often to take advantage of the “time value of money.” Because your investments are allowed to compound tax-free, there are significant advantages to investing on a monthly basis rather than at the end of the year.
3. Choose mutual funds and put your money in the hands of professionals who have the investment know-how to help you reach your retirement dreams.
4. Maximize your RRSP contribution to take advantage of your single greatest opportunity to save for retirement and defer taxes.
5. Don’t be too cautious and choose low-risk investments only. A diversified portfolio should include a variety of assets to minimize risk and maximize return.
6. Think long-term instead of letting short-term market volatility sway your investment decisions.
7. Take advantage of dollar-cost averaging with a pre-authorized chequing plan that spreads your mutual fund purchases over time and gives you greater long-term returns.
8. If you don’t have the cash available, consider moving non-registered investments to your RRSP in kind.
9. Don’t wait until the last minute to meet the March 1 deadline – investment decisions shouldn’t be rushed.

One of the investment companies that we use, Mackenzie Investments, has some excellent resources available online for free, such as their Retirement U site. If you’ve never taken a close look at your retirement plan, I recommend you start with their Retirement U Guidebook. It’s an excellent resource for helping you make sense of your long-term financial picture, and where you should start today.

Photo Credit: “Checkmark” by Allen McGregor on Flickr

From the Department of Finance Canada:

The $5,000 annual contribution limit is indexed to inflation using the Consumer Price Index (CPI) data as reported by Statistics Canada, rounded to the nearest $500. This means that, each year, an unrounded indexed amount is calculated based on increases in the CPI, but the annual contribution limit changes only when the unrounded amount reaches the rounding threshold (see the table below). For 2013, the unrounded indexed amount moved beyond the $5,250 threshold for the first time, so the annual contribution limit increases to $5,500.

The Tax-Free Savings Account (TFSA) is the most important financial tool introduced by the Canadian government since the RRSP. We recommend that everyone take advantage of it, if for nothing else than a place to keep your three-month emergency fund.