The RRSP Mistake That’s Costing Canadians $1000's

Ahhh yes. The RRSP. One of my favourite registered investment accounts… and easily one of the most underused and misunderstood accounts I see with clients.

Let’s get real. Most Canadians aren’t prioritizing long-term wealth the way we should. And one of the biggest culprits? The RRSP.

If you want to take control of your money and set yourself up for real financial freedom, here’s what you need to know about the RRSP.

What is an RRSP?!

The Registered Retirement Savings Plan (RRSP) is a self-funded pension that allows us to save and invest towards retirement. For those of us who don't have a pension through work or are self-employed, this may be a great account to have, but consult with a financial professional or your accountant to see whether it makes sense given your tax bracket.

So long as you file taxes, you can open an RRSP. I've actually helped coaching clients open an RRSP for their 13-year-old kiddos because they have summer jobs and file their taxes! Start em young folks and they'll thank you later:)

You have 60 days after the end of the previous year to contribute to your RRSP. Your contribution limit is based on 18% of your previous year's income, and unused room rolls over, which can be used in future years.

Here are the benefits of the RRSP:

• Contributions made into your RRSP can be used as an immediate tax deduction in the year that the contributions are made OR you can carry forward the contribution to a future year when you're making a higher income.

• Contributions grow tax-deferred until you withdraw the funds for your retirement (via your RRIF). So yes.....you will eventually have to pay tax on the money that you're investing in your RRSP right now, but the idea is that you're in a lower tax bracket in your retirement years when you withdraw funds.

• Your RRSP can be used under the Home Buyers Plan, where you can borrow up to $60,000 towards your first home, or under the Lifelong Learning Plan, where you can borrow up to $20,000 ($10,000/year over 2 years) if you want to go back to school.

Example: You make $80,000/year and contribute $10,000 into your RRSP. When you go to file your taxes, the $10,000 can be used as an immediate tax deduction, making it look as if you only made $70,000/year, which could potentially bump you into a lower tax bracket. You can also carry forward that $10,000 contribution and use it in a year when you're making more than $80,000/year!

How Much Can You Contribute?

Your RRSP contribution room is tracked by the CRA. Here’s how to check:

• Log in to CRA My Account and scroll down to where it says "Savings and Pension Plans" OR

• Open your latest Notice of Assessment and look for “Available Contribution Limit”

Important: This number does not include contributions made after last year’s deadline.

Here's Where Things Get Scary

• Only 20% of Canadians contributed in 2024, and the average contribution was $3,420! Peanuts.....

• And in Canada, only 13% of the population maxed out their RRSP!!!

And this is why retirement can feel impossible. We're not prioritizing saving over anything else.

BUT HERE'S THE BIGGER PROBLEM THAT I SEE ALL OF THE TIME......

A lot of people actually have money in their RRSP, but it’s sitting in “safe” investments like low-yield GICs or “high-interest” savings accounts.

Safety without growth is expensive. If inflation beats your return, your purchasing power shrinks, and you actually end up losing money. That “safe” money is costing you hundreds of thousands long-term.

How I Do It

I personally invest 100% of my long-term retirement funds in equities. No bonds. No GIC's and ZERO cash. The market’s been hot lately, and my returns reflect that.

I also focus on maxing out my RRSP each year, and my wife and I also use a Spousal RRSP to help with income splitting down the road since she has a pension through work.

Here's What Most People Miss

• Pension adjustments reduce your RRSP room. This is why it's really important to be monitoring your finances so you don't over-contribute!

• You don’t have to deduct contributions the same year you make them. You can carry deductions forward to when you’re making more money!

• You can borrow funds under the Home Buyers’ Plan or the Lifelong Learning Plan!

But What If You Think You Don't Have Extra Funds?!

Well, I’ve got good news. Out of the 1,100 clients I’ve coached over my career, there’s almost always a way to sock some money into your RRSP.

You’ve got options:

• Use cash sitting in savings. If you've been setting money aside for an irregular expense or just have cash sitting idle, this is when to use it! Wouldn't you rather pay yourself than the government?

• Take an RRSP loan → contribute → use the refund to pay down the loan.

• Do a contribution in kind → move investments from TFSA to RRSP. Any contributions you make from your TFSA to your RRSP, you will get that room back on Jan 1 of the next calendar year.

What about a Spousal RRSP?

A spousal RRSP is a powerful strategy. The higher-income spouse contributes and gets the deduction now. The lower-income spouse withdraws in retirement as the beneficiary.

It’s all about income splitting, tax planning, and long-term thinking. Jacq and I use this because she’ll have a pension as a firefighter, and I won’t because I'm self-employed.

Getting Started

If you’re ready to start your RRSP, you’ve got options:

You can head into your local financial institution and work with an advisor who won't spend a lick of time explaining anything to you and will probably sell you some underperforming, high-fee mutual funds......

OR...... you can use.....

• Justwealth – a robo-advisor that manages your portfolio for you. Click here for more info and to get started with your account.

• Wealthsimple – DIY investing platform if you want more control and to pick your own investments. Click here to open up your account today.

Both are great ways to get started, whether you want a fully hands-off approach or to do it yourself.

The important part is to actually start. And I don't care which option you end up using. Just use one!

Build Wealth Intentionally

We know the deadline rolls around every year. But did you know you don’t have to scramble every February to make your RRSP contribution?

I coach my clients to contribute throughout the year so they’re not panicking at tax time or trying to come up with a lump sum at the last minute. Automated, intentional, consistent. That’s how wealth is built.

You don’t need to wait for a deadline to start building your future. You can take action and start building real wealth today.

If you want to go beyond just “making a contribution” and actually understand how to use these strategies properly and strategically, come join me inside The Broad Money Collective.

Inside the Collective, I teach you the financial principles you should have learned in school so you can transform your finances, reduce stress, and finally feel confident about your money. We cover real wealth-building strategies, and I help you set up a plan that actually works for your life, your income, and your goals.

And yes, we do monthly live Q&As where you can bring me your real-life questions and get clear, practical answers.

No more guessing. No more Googling at midnight. Just clarity, strategy, and a plan.

Click here to learn more about The Collective.

Stop leaving money on the table. Start building wealth intentionally today.