Sanity can prevail in the annual RRSP arena
The Advocate, Wednesday January 4, 1995
When I came back from my holidays last year, after spending the month of February in Florida, a number of people asked me, "How can you leave in the middle of the RRSP season?
Isn't it your busiest time?" Once upon a time it was. It was the last minute madness to beat the March deadline that started to get to me. I asked myself, there has to be a better way. Why do most wait until the last week in February to invest in an RRSP?
There are basically two reasons. First, because of the March 1 deadline. The government allows us an extra 60 days to get a tax-deduction for the previous taxation year. Second, because of our human tendency to procrastinate.
These two reasons tend to be annually habit forming. One additional reason may be the fact that many of us have a difficult time coming up with a large sum of money to invest in an RRSP at that time, especially just after Christmas.
Is there a better way out of all this madness?
I have educated my clients to a more sane, systematic, profitable way. It is very simple and works remarkably well.
First, decide how much you want to put in an RRSP every year. Divide by 12 (i.e. $6000 by 12 = $500). Next, start a monthly investment plan in January 1995, not February 1996! The advantages are apparent. Since you have a tax-shelter working for you, why not have your gains come sooner and sheltered longer - 12 to 14 months longer? You also can take advantage of a dollar-cost-averaging strategy. I have an excellent article available. "The Guaranteed Way to Beat the Market" that explains how this works.
At the end of the year, you will know exactly how much you can contribute and simply top up your plan if necessary. Coming up with a few hundred dollars rather than thousands is a lot easier.
But you say, how can I invest with you in February if you are in Florida? Simple. Go to your friendly local bank and but a RRSP with the appropriate amount. Put it in a daily interest savings account. When I return I will transfer it for you into a plan you have with me without attracting any tax. By the way, we have a self-directed plan that can hold up to ten different mutual funds for maximum diversification and safety.
We also have an excellent brochure explaining how it works. Contact me for one.
There you have it, sanity returns to the annual RRSP arena.
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