Money & Career

Six tips to increase your RRSP investment

Put your contributions into overdrive with these expert-recommended strategies.

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1. Get your boss to help out

If your company offers a defined benefit pension plan, join. If you can get into a group RRSP plan or defined-contribution pension plan where your company matches part of your contributions, run—don’t walk—to HR to sign up. Why? Because if you don’t, you’re turning away free money that will help you reach your retirement goals faster.

2. Reinvent your tax refund

For many people, the biggest motivation to invest in RRSPs is the juicy tax refund that follows a few months later. It’s like a present from the government to reward you for being wise enough to save for retirement, right? So it’s okay to spend it on a spontaneous vacation down south. Not so much! Your refund is really only the government returning a tax overpayment to you. So instead of having that money throughout the year to invest it yourself, you’ve been lending it to the government for free. You can avoid this by planning the amount you want to contribute to your RRSP during the year and telling your employer in advance. Then the company can reduce the amount of tax taken off of each paycheque, freeing up more cash flow for you to put directly into your RRSP.

3. Make it automatic

Make 2013 the year that you actually set up an automatic savings plan to stash money in an investment account every time your get your paycheque. You won’t ever see the money and be tempted to spend it, and it will snowball every month.

4. Borrow to save

It may sound strange to save and borrow simultaneously, but if you do it right, you can catch up on your saving quickly. Most financial planners agree that an RRSP ‘top-up loan’—borrowing to boost the amount you are investing—is a sound strategy as long as you pay off the debt quickly.

5. About that raise...

A great way to build your savings faster is to take full advantage of salary increases or other new sources of money. “If you get a raise, you can treat it like found money and divert it into your RRSP,” says Patricia Domingo, investment and retirement planner at RBC. You’re already accustomed to living on your previous salary, so you won’t miss the new money if it’s automatically shovelled into your savings. This will prevent your spending from drifting upwards with your income.

6. Focus on your home... for now

You’re behind on your RRSPs, and you’ve got a huge mortgage to pay off, too. Which one should you focus on first? Paying your mortgage down is often the winning move. Compare the rate of return on investments inside an RRSP with the interest rate you’re paying on your mortgage, while taking risk levels into account. “The highest risk-adjusted rate of return will almost always be repaying the debt,” says retirement expert Malcolm Hamilton. “The rate of interest you pay on borrowing is virtually always higher than the interest you earn on savings.”

What’s the maximum RRSP limit?

Check your Notice of Assessment from last year’s tax return to see your current year’s maximum RRSP-contribution. Here’s the annual limit.