Early Contribution to an RRSP

It's a great idea to contribute to an RRSP each year, especially if you are young and a long way from retirement. It is advisable to contribute early in the year so that you start the tax-free compounding of earnings within the RRSP earlier.  Also consider monthly payments into an RRSP throughout the year.

Once made, undeducted contributions within your deduction limit, or to an excess of $2,000, can be carried forward indefinitely, without penalty, for deduction in future years. This could be a substantial advantage if you claim the deductions in years when you are in a higher tax bracket.

For your RRSP contribution to be deductible for a particular tax year, the contribution must be made by the 60th day following the end of the year. For the 2007 tax year, the deadline is February 29, 2008.

Information for RRSP Tips is provided as a public service by the Chartered Accountants of British Columbia.