Last minute RRSP tips

February 24, 2012 | Last updated on February 24, 2012
2 min read

The 2011 RRSP contribution deadline is rapidly approaching, and today, BMO experts hosted a media panel to share strategies and insights on how your clients can get the most out of their investments.

Last year, an array of events around the world created a volatile market environment, with the TSX alone dropping 11%, but one thing that didn’t drop was the number of Canadians contributing to their RRSPs.

Despite recent findings by RBC that Boomers are dragging down Canada’s RRSP contribution rates, a 2011 study done by BMO found that most people continued to contribute to their RRSPs. In fact, a large percentage of Canadians added more.

Read: Boomers drag down average RRSP contribution

Currently, Canadians put forward a total of $33 billion in annual contributions, and a remaining $600 billion in unused dollars is available.

Tina Di Vito, head of the BMO Retirement Institute, urges especially those who have no employee pension plan to fall into line.

“There has been a decline in pension coverage in Canada,” says Di Vito. “Even younger people who are working should take advantage [of RRSPs]. People can start saving regularly and, in reality, should make contributions monthly. Growth of savings is key, [and one way to achieve this] is through getting an RRSP and investing in it.”

But market uncertainty has left many investors wondering where to place their capital when looking at options ranging from bonds, savings and equities.

Investors need to be honest with themselves about their current risk tolerance and about how realistic their goals are—in light of the fact that BMO recently found 71% of Canadians are still wary of the markets and the growth of their accounts.

“You have to remember that you’re not alone,” says Serge Pépin, head of investments at BMO Investments. “A planner or advisor will help you check your emotional baggage at the door, and find the right mix of assets.”

The final contributor to the panel, Domenic Gallippi, head of term investment products for BMO, pointed out that stable investments like GICs provide investors with “an anchor in the storm” which allowed them to diversify with less fear of volatility.

The certainty provided by the term investment reduced the risk that investors would pull out of their risk assets.

“The longer you invest, the better,” said Gallippi, “and having cashable and non-cashable assets, with a higher rate, will provide more options.”

The takeaway for your clients?

If you’re close to retirement, don’t delay. Most people don’t start contributing to RRSPs until they’re in their 40s, but with 10-15 years left, or even 5, you still have time to boost your nest egg and support yourself for the roughly 25 years you may spend in retirement.

For younger clients and those strapped for cash, Pépin urges that they forego some of their daily luxuries in order to put away as much as possible into savings.