Value of Simple RRSP Series Part 1: the Deadline

February 10th, 2015 by Potato

“I love deadlines. I love the whooshing noise they make as they fly by.”

February is usually better known as “RRSP season” as the deadline approaches — this year that deadline is March 2, 2015.

But a deadline for what, exactly?

The deadline for RRSP contributions to count against the previous years’ taxes — due to a quirk in the rules, contributions made the first 60(ish) days of the the year can count to the current year or the previous one — so this is a last chance to make a contribution and reduce your 2014 taxes owing.

Yes, there is time value to money, and you don’t want to go a lifetime without contributing to your RRSP, but this is the least important deadline there is. If you don’t log in to your online banking to make a contribution until March 3rd this year, it just means you have to wait a year and two months for your refund instead of just two months. When you’re 75 and spending that money you’ll care whether it’s there at all far more than whether the tax deduction was taken a year later. Plus for many people, the TFSA is a better choice to prioritize anyway, so this RRSP and refund stuff is just noise. Oh, and implicit there is another fact about the deadline: you can contribute at any point during the year, not just during this special “RRSP season.”

But no, you will not lose your contribution room — you carry it forward and accumulate it until you’re ready for it. The consequences of missing the deadline are very minor, so if you’ve procrastinated this long on putting together a financial plan and starting to invest, another few weeks or months is not going to kill you — though please do commit to getting it done sometime this year.

Indeed, you don’t have to contribute in a lump sum right at the end and can ignore the deadline by starting a regular contribution plan now, and even fill out a form get your employer to stop taking the tax off at the source so you get the money working for you right away (and then you don’t get a refund in the spring — which also takes away the temptation to spend it). So despite the media and advertising blitz that happens every February, RRSP “season” isn’t really a big deal.

So, let’s not stress out over this deadline: if you miss it, the consequences are pretty minor. The last few weeks of February are the worst time to try to go to a bank to open an account or meet with your planner. But if you do want to get your contribution in before the deadline you can do so and let it sit in cash (or a money market fund — the equivalent for a mutual funds account), as Sandi points out in this post, and make a plan at your leisure, and invest it when you’re more prepared (though seriously, it only takes one weekend to burn through the Value of Simple).

One Response to “Value of Simple RRSP Series Part 1: the Deadline”

  1. Weekend Reading – Killing mortgages, Ponzi schemes, books for investors and more | My Own Advisor Says:

    […] Holy Potato started this RRSP series.  I’m a fan of John’s latest book that you can buy here. […]