Are you one of those people who scramble every February to make an RRSP contribution before the end of the month?

While that scenario is definitely better than not contributing at all, experts point out that you are not getting the most out of your money. 

David Gillan, vice-president, T.E. Wealth, says what a lot of people do is either deposit the lump sum based on what they can contribute or how much they have to put in to break even and not pay any taxes. But they often wait until the end of February.

“Ideally, we’d like to take a lump sum and put it in Jan. 1 of each year,” he says. “That way the money is in there and starting to grow tax free for you.”

Of course, most experts recommend contributing a certain amount of money to your RRSP every month. “As markets move up and down through the year,” says Gillan, “at the end of the year it should average out to be a better return for you overall because you’re not just lump-summing it.”

Even better, you will have a retirement savings plan in place.

Should you take a loan for your RRSP?

Many people do. Since the RRSP loan itself is the security, when banks lend out money for an RRSP it’s generally only a one-year term. You just have to make sure whatever you are borrowing to put into your RRSP you can pay back every month. And you should still be able to make your current RRSP monthly contribution.

Also, remember that you don’t get to write off that interest because you are using it to put into a RRSP.  

SAVINGS PLAN
“The rule of thumb keeps changing,” says Gillan, “but we always say for every dollar you need in retirement, you need to put away about $20 in savings.”

That’s based on 30 years of retirement income as well as three per cent inflation and an optimistic return of seven per cent overall.

Be sure to work with a financial adviser who will review your entire portfolio with you.