It's Your Money  

Reasons to invest in RRSP before March 1 deadline

Benefits of RRSPs

As the deadline for contributing to Registered Retirement Savings Plan (RRSP) accounts approaches, many Canadians are considering the benefits of contributing before March 1 in order to have their contributions count against 2022 income.

While there are several well-known reasons for contributing to RRSP accounts (which have been discussed many times including in some of my past columns) such as tax savings and retirement planning, there are also lesser-discussed reasons that Canadians should consider.

With only nine days left before the deadline, let’s explore some of these other reasons and why making a contribution to an RRSP account could be a smart financial move.

1. Access to the Home Buyers’ Plan - One lesser-known benefit of contributing to an RRSP account is the ability to access the Home Buyers’ Plan (HBP). The HBP allows first-time home buyers to withdraw up to $35,000 from their RRSP account to use as a down payment on a home. By contributing to an RRSP account, Canadians can take advantage of this program and access the funds they need to purchase a home when the right time comes. This can be especially helpful for those who may be struggling to save up enough money for a down payment.

2. Protection from creditors - Another reason to contribute to an RRSP account before the deadline is the protection it offers from creditors. In the event of bankruptcy or legal action, funds held in an RRSP account are protected and cannot be seized by creditors (with some exceptions). This can be especially important for those who are self-employed or who work in industries that are more susceptible to legal action.

3. Spousal RRSP contributions - Spousal RRSP contributions are another lesser-known benefit of contributing to an RRSP account before the deadline. Spousal RRSP contributions are when one spouse contributes to an RRSP account in the other spouse’s name. This can be especially beneficial in situations where one spouse earns significantly more income than the other. By contributing to a spousal RRSP account, the higher-earning spouse can reduce their taxable income and provide retirement savings that will be taxed in the lower-earning spouse’s name.

4. Tax-deferred growth - While the tax savings associated with contributing to an RRSP account are well-known, the tax-deferred growth of these accounts is another important consideration. The funds held in an RRSP account grow tax-free until they are withdrawn. This means that any interest, dividends, or capital gains earned on the account are not subject to tax until the funds are withdrawn. This can lead to significant savings over time and can be especially beneficial for those who have a long time horizon for their retirement savings.

5. Ability to reduce OAS clawback - For those who are nearing retirement age and are receiving Old Age Security (OAS) already, contributing to an RRSP account before the deadline can help reduce the OAS clawback. The OAS clawback is when the government reduces or eliminates a person’s OAS payments based on their income.

While the well-known benefits of contributing to an RRSP account are certainly a core component of retirement planning, these additional potential benefits should not be overlooked. With the deadline for contributions quickly approaching, consider your financial situation and consult with a professional financial planner to determine whether contributing to an RRSP account is the right choice for you.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

Brett has worked in the financial advice industry for over 15 years and is designated as a chartered investment manager(CIM) and certified financial planner (CFP).

In 2014, Brett was appointed to the board of directors of FP Canada (the national professional body for financial planning) and spent seven years on the board, including his final two as board chair. More recently, he was appointed to the Financial Planning Standards Board (FPSB), which is the international professional body for this industry with a three-year term beginning in April 2023.

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy-to-understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the national and global boards focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns or if you’d like a referral to a qualified CFP professional in your area by emailing him at [email protected].


The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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