{"id":7057,"date":"2022-01-24T10:02:41","date_gmt":"2022-01-24T15:02:41","guid":{"rendered":"https:\/\/www.batirente.com\/?p=7057"},"modified":"2022-01-24T10:22:55","modified_gmt":"2022-01-24T15:22:55","slug":"rrsp-6-mistakes-to-avoid","status":"publish","type":"post","link":"https:\/\/www.batirente.com\/en\/rrsp-6-mistakes-to-avoid\/","title":{"rendered":"RRSP: 6 mistakes to avoid"},"content":{"rendered":"

An RRSP<\/a> is an excellent retirement savings tool. Still, you should be aware of the rules and other good practices that come with it. Here are 6 mistakes to avoid if you want to get the most from your plan.<\/p>\n

1. Procrastinating<\/strong>
\nTime is your best friend when saving for your retirement or for any other goal. Starting early and being consistent are the ingredients to easily grow your savings. What\u2019s more, the performance achieved by regular contributions will help you during your accumulation phase. Contributing online<\/a> by pre-authorized debit or through a set amount deducted from your pay is simple. See all the solutions we offer you to automate your contributions\u2014a small effort for big rewards!<\/p>\n

2. Exceeding your contribution limit<\/strong>
\nThe amount you can contribute in a given year is indicated on your Revenue Canada Notice of Assessment. You may contribute up to 18% of your previous year\u2019s qualifying income to your RRSP. You can also carry forward unused contribution room from previous years.<\/p>\n

Be careful not to exceed your annually assigned limit, or you will have a penalty to pay of 1% per month on your excess contributions. Note that you can exceed this limit without penalties for a lifetime maximum of up to $2,000. If you\u2019ve made the maximum contributions to your RRSP, consider investing in your B\u00e2tirente TFSA<\/a>, whose 2022 limit is again $6,000.<\/p>\n

3. Spending your tax refund<\/strong>
\nThere are many advantages to reinvesting your tax refund! Contributing to your TFSA or RRSP can bring you closer to achieving your dreams.<\/p>\n

Invest in a B\u00e2tirente TFSA to start off or increase your emergency fund, which helps you deal with unforeseen events. A good practice is to save the equivalent of three to six months\u2019 worth of your usual expenses. It\u2019s also a wise option if you\u2019re hoping to save for a short- or medium-term project you want to make happen, like renovations or a major purchase. By investing your TFSA in one of the funds offered by B\u00e2tirente, based on your risk tolerance, you\u2019ll also be growing your investment!<\/p>\n

When you contribute a portion of your tax refund to your RRSP, you\u2019ll be able to benefit from a tax refund or tax break the year after, with your contribution being essential for decreasing your taxable income.<\/p>\n

In other words, you\u2019ll be able to reach your retirement goals faster by increasing your RRSP this way. Check your most recent federal notice of assessment to confirm whether you have any unused contribution room. Lastly, investing at the start of the year ensures you get the growth advantage offered from the performance of the B\u00e2tirente fund or funds in which you invested.<\/p>\n

4. Withdrawing before your retirement<\/strong>
\nThere are consequences to pulling out money from your RRSP before you retire. In fact, you\u2019ll need to pay tax on that amount since any sums withdrawn will be added to your annual income. Moreover, unlike a TFSA, you\u2019ll lose your contribution room.<\/p>\n

There are two exceptions, however: the Home Buyers\u2019 Plan (HBP), which facilitates the purchase of a first property by allowing for a non-taxable withdrawal of up to $35,000 from your RRSP; and the Lifelong Learning Plan (LLP), which allows you to return to school by withdrawing up to $20,000, also non-taxable.<\/p>\n

5. Not updating your plan<\/strong>
\nYou should regularly assess your retirement goals\u2014the age you intend to stop working and the desired annual income\u2014and adjust as needed. As a B\u00e2tirente member, you can access the On Target Retirement<\/a>\u00ae <\/em><\/sup>\u00a0tool in the\u00a0