Congratulations! If you’re reading this, you’ve made it through the 2013 Registered Retirement Savings Plan (RRSP) season. After taking a moment to let the dust settle, it may be a good idea to reflect upon your clients’ savings strategy leading up to the contribution deadline. Understanding the implications of their actions in 2013 can help clients plan for their 2014 contributions.
In February, Advisor.ca published the results of a poll that found 31% of Canadians planned to leave their RRSP contributions to the last minute in 2013 and 64% of Canadians stated that as of December 2013, they had not yet set aside the money they planned to contribute before the deadline.1 A rush to deposit contributions before the deadline can mean that Canadians aren’t saving as much as they intended and coming up with a lump sum large enough to max out contributions may not be a realistic option. If you have clients who waited until the last minute or didn’t contribute as much as they had hoped to their RRSPs in 2013, here are some helpful resources to maximize the value of their contributions and get their savings on track for 2014.
- Help them see the importance of planning. Encourage clients to set aside smaller sums of money each month based on their contribution limits and savings goals. This approach can help them ensure they are on track to meet their goals for that year, reduce the stress of coming up with a lump sum payment at the deadline and help to offset market risk by investing more regularly. Tools such as the RRSP contributions and withdrawals calculator can help your clients learn more about the impact that their contributions and withdrawals have on their savings.
- Make sure they are using products that best suit their needs. Should your clients be using an RRSP or TFSA? There are a lot of factors that help determine the answer to that question. Are your clients on track towards their retirement savings goals? Did they make unexpected withdrawals to their RRSPs in 2013? What is their income? How and when do your clients intend to use their savings? It’s important to know the answers to these questions when suggesting the right product for your clients. To help them plan for their 2014 contributions, try recommending they read articles such as “Where to stash your cash: RRSP or TFSA?” to help determine what savings vehicle is appropriate for what they are saving towards that year. If you’re looking for some insight into the topic, check out “Hot Topic: Which is a better retirement planning tool—RRSP or TFSA?” to see what other advisors would recommend to their clients.
- Ask your clients about their group plans. Employers often offer matching RRSP contribution programs. Make sure that your clients are taking advantage of their group plans to help maximize their annual contributions. Try sharing articles with your clients such as “Are you passing up free retirement savings?” to open the conversation and show the importance of participating in programs like this.
Planning for annual RRSP contributions can help your clients maximize their annual contributions and ensure that they’re using the right products for their needs. As the old proverb states, hindsight is 20/20, so encourage clients to look back at their savings behaviour from years past to help put a plan in place to achieve their savings goals for 2014.
1 CIBC, 2013