Optimize Your RRSP Investment: Five Proven Tips for Maximizing Returns

Here are our top five tips to optimize your RRSP and maximize returns.

Maximize Your Contribution

If you are in a higher tax bracket, investing the maximum can lower your tax rate, saving you money. However, if you know you will have a significantly higher income soon, you may want to wait to claim the deduction until you are in the higher tax bracket to save more in taxes. For example, if you invest $10,000 while you are in a 15% tax rate, you save $1,500 vs. saving $2,600 in a 26% tax rate.

Don’t Wait Until the Deadline

The sooner your money is working for you, the better. Consider investing earlier in the year vs. later and try not to wait until the deadline. February 29, 2024, is the last day to make RRSP contributions for the 2023 tax year. If you can’t invest the maximum contribution at the beginning of the year, then set-up a monthly contribution program.

Use Your RRSP Tax Refund Wisely

While receiving a large tax refund once a year can be exciting, you are missing out on the opportunity to invest and earn on that money throughout the year. If you are receiving a large cheque, consider filing a T1213 form to reduce the amount of income your employer withholds from your pay cheque, giving you more funds to invest throughout the year. Consider using your tax refund as a lump sum towards next year’s RRSP contribution or using it to pay down high-interest debt such as credit card debt.

Diversify Your Investments

Fixed income investments like GICs are safer and more attractive if you are concerned about losing money for your retirement. If your investment isn’t covering the inflation rate, it’s almost the same as losing money. Consider diversifying your investment into Exchange Traded Funds (ETFs), stocks, bonds, mutual funds, and alternative investments like private real estate. A diverse portfolio can help you mitigate risk and balance security vs. opportunity.

Leverage Expert Advice

Talk to a financial advisor or portfolio manager to help you make the right decisions for your retirement. They will have the experience and knowledge to answer your questions and make recommendations for your unique situation.

For more information on alternative investments, check out our private real estate solutions or contact us today.