You must deal with the RRSP deadline. But you may delay your RRSP choice.
Monday, March 2 is the deadline to make a contribution for the 2014 tax year. The sooner you contribute, the better. But after you contribute, don't let smooth, well-planned sales pitches pressure you into which way you invest your RRSP money.
Take the time you need; wait until you have considered and understood all the choices.
Almost all RRSP companies offer a cash or money market account where you can park your contribution. These instruments don't yield much interest, so don't delay your decision too long.
"I already have an RRSP investment program so can't I simply add my new contribution to that?" you might ask.
First, review whether this instrument is still performing up to expectations and, even more important, whether it's still appropriate for your present and likely future situation.
For example, you might have decided recently to go back to school or buy a home in the near future, and might need to "borrow" from your RRSP to provide the money. Or you might have decided to take time off work or retire sooner, and withdraw money from your RRSP earlier than originally expected.
In these cases, you would need to make sure you had fairly liquid/accessible money in the RRSP so you wouldn't be forced to sell equity funds or stocks, for example, just when the stock market had slumped.
Unless you are starting your first RRSP, having a self-directed RRSP makes moving money from one investment to another far easier than having several different plans.
Rarely will you stay with the same instrument or company for the life of your RRSP and then RRIF. If you have separate plans, it can take time and cost service charges to close one plan, transfer the money and then open a new plan.
A self-directed plan allows you to switch from one type of investment to another far more efficiently - and use the "park your money" approach outlined earlier.
Mike Grenby is a columnist and independent personal financial advisor; he'll answer questions in this column as space allows but cannot reply personally. Email [email protected]
