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Six ways to add money to your RRSP

January 21, 2021

Money Sense

Martha Harbell

Young couple at home, looking interested in something on a desktop computer

You already know it’s important to add money to your RRSP (Registered Retirement Savings Plan). Of course you want to build up your savings and plan for the future - doesn’t everyone?

Where most people get stuck is finding the money to contribute. After all, you have everyday expenses, maybe a mortgage or some debt you’re paying down, and you might be saving up for a trip, or a new car. You want to add money to your RRSP, but it can feel like you don’t have any to spare.

Well, you might have more options than you think. Here are some six tips to consider.

1. Add a little bit at a time, automatically

You hear a lot about RRSP contributions in the months before the annual contribution deadline, usually late February or early March. So people often spend January and February trying to come up with the maximum contribution amount.

Make things easier for yourself by contributing throughout the year, a little at a time. You can do it automatically by setting up a pre-authorized contribution plan (PAC). A PAC withdraws a set amount from one of your other accounts and adds it to your RRSP at pre-determined times - every month, for example. You can start by contributing as little as $25 at a time.

Now, your RRSP contributions can build throughout the year with no work on your part - plus, you won’t be scrambling to come up with a lump sum in February.

2. Use your tax refund

If you get a tax refund, why not add it to your RRSP right away? If it sits in your chequing account you’ll be tempted to spend it. Contributing it to your RRSP helps build up your retirement savings. After all, a tax refund is your own money coming back to you - use it wisely by investing in your own future.

3. Debt paid off? Add to your RRSP instead

If you’ve been working towards paying off your debt, you might have developed some great savings strategies and self-control along the way. When your debt is paid off (congrats, by the way) you can hold on to those great habits. Instead of debt payments, make regular contributions to your RRSP. Keep up the good work!

4. Put your annual bonus to work

Getting a bonus is a great opportunity to add money to your RRSP. You worked hard for that cash, so we’re not saying that you should immediately contribute all of it. Here’s an idea: Split your bonus into thirds. Contribute one-third to your RRSP, one-third to paying off debts, and use one-third to reward yourself with something fun.

5. Pay increase? Increase your RRSP

Get a raise? Good for you! It can be tempting to increase your spending habits to match, but increasing your savings instead will help you more in the long run. So when your paycheque goes up, increase your regular contributions to your RRSP to match.

Here’s another thing to watch for on your paycheque: Once your earnings exceed the annual maximum set for the Canadian Pension Plan/Employment Income (CPP/EI), CPP/EI deductions are no longer withheld and you’ll notice a net pay increase on your paycheque. If you use this increase to set up automatic contributions to a high-interest savings account, you can start building up a lump sum contribution for your RRSP.

Learn more about CPP contribution rates, maximums and exemptions
Learn more about EI premium rates and maximums

6. Give yourself a gift

Ever open a birthday card and find a cheque inside? Lots of people get money as a gift for birthdays, holidays, and special occasions. Contributing some or all of that to your RRSP will help grow your retirement savings! We’re not saying you should never spend that money on something fun, but think of it this way: the more you contribute to your RRSP, the less you’ll worry about the future. That’s a gift, too.

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Learn more about RRSPs

Five tax benefits of RRSPs
Pay less tax with a spousal RRSP
Maximize your contribution with an RRSP loan