Get serious about your retirement

More Canadians than ever are falling behind in saving for their retirement. As a result, many are accumulating registered retirement savings plan (RRSP) room that they will never use. Meanwhile, studies tell us that many baby boomers feel inadequately prepared for retirement.

Registered savings are the most important tax-deferral device for the vast majority of tax-payers, but few individuals who have fallen behind in setting funds aside for their retirement have the means to fully capitalize on this opportunity today.

One strategy worth considering to take full advantage of your RRSPs is a catch-up loan. A catch-up loan gets money into your hands today to take advantage of your accumulated RRSP contribution room. With a large, one-time contribution, many investors can accomplish two key things:

How does it work?

You can carry out this investment strategy in three steps:

Step one: Gather up your most recent Notice of Assessment and your earnings information from this year.

Step two: Meet with your financial security and investment representative to review your financial security plan, and determine a payment and investment amount that meets your needs. Your investment representative can help you determine if your financial situation is appropriate for carrying the cost of a catch-up loan.

Step three: Complete the paperwork now, so you receive the contribution before the RRSP deadline. You may request the funds be forwarded just prior to the RRSP deadline to reduce interest costs.

See an immediate improvement

You’ll immediately experience an improvement in next year’s “balance sheet” because you reduce income taxes that you would otherwise be paying, while augmenting your registered savings. By applying these tax savings directly to the loan you can shorten the payment schedule or reduce your payments.

Had a big earnings year?

If you’re expecting an unusually large tax bill from a great financial year you should definitely consider the RRSP catch-up loan. You pay a higher percentage in taxes as you move up the earnings ladder. Injecting a large amount into your RRSP will help reduce the tax burden. It’s especially important to protect yourself in the good years.

Act now

Talk to your financial security and investment representative about a catch-up strategy that works for your individual needs. He or she can help you determine if this approach is right for you, and if so, implement the plan in the most efficient way so you keep as much of your hard-earned money as possible. Put time on your side and catch up on that unused room today.

This information is general in nature, and is intended for informational purposes only. For specific situations you should consult the appropriate legal, accounting or tax advisor.