Newspaper article The Canadian Press

RRSP Season Can Be Counter-Productive to Proper Saving, Advisers Suggest

Newspaper article The Canadian Press

RRSP Season Can Be Counter-Productive to Proper Saving, Advisers Suggest

Article excerpt

Should RRSP season be an investment imperative?

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TORONTO - As the hype around RRSP season ramps up, it's time to ask whether pushing a big chunk of cash into your retirement savings every winter is the best investment approach.

Some financial advisers say the tradition of RRSP season leading up to tax returns only encourages procrastinators to wait until the RRSP deadline -- March 2 this year --before they contribute to their plan.

For everyone else, it's smarter to set aside money on a regular basis through a pre-authorized withdrawal from their bank account.

"People are likely to save more by investing in their RRSP monthly and treating themselves like a periodic bill," said Jason Abbott, an adviser at WealthDesigns.ca, a financial planning firm based in Toronto.

Depositing money on a regular schedule also allows investors to take advantage of a practice called "dollar-cost averaging," considered by many as a better way to boost investment value and avoid market volatility.

Since stocks and commodities generally grow over time, the thinking goes that by saving each month investors will increase their odds of buying into the stock market when values are lower.

While the concept isn't new, the practice is catching on.

A new study from the Bank of Montreal released Thursday suggests that more Canadians have set aside money early for their RRSPs this year.

About 42 per cent of Canadians surveyed told they bank they had already contributed to their RRSP by mid-November 2014. That's an increase of seven per cent from the prior tax year when the average amount contributed to an RRSP was $3,518, the bank said.

With all of that money being set aside, it's important to keep tabs on how it's growing, financial advisers say. Just because the process is automated doesn't mean you should let your investment do all the work for you.

Ensure your monthly withdrawals keep pace with what you're bringing home. Advisers suggest contributions amounting to about 10 per cent of annual income. …

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