I’ve looked up my available contribution room for my RRSP this year and I have the funds available right now to fill it up. I’ve already got my emergency savings and all that. Is it best to drop it all in at once now or contribute bi-weekly for the year?
From the point of view of using the contribution room in your registered retirement savings plan (RRSP) there isn’t any difference. You could put the money all in now, put it in every two weeks, or deposit the money into your RRSP account in February. From the point of view of making the deposits and using your contribution room, it will all be the same.
There are a couple of factors I’d consider before making the choice of when to move the money from your bank account to your RRSPs. One is whether there is a fee to transfer money from your bank into the RRSP. If you pay a transfer fee each time money leaves your bank (or enters your RRSP) then it would be less expensive to do one big transfer rather than 26 small transfers.
Another thing to consider is whether you might need the money you plan to deposit now for something else. The person asking this question already has an emergency fund. It might be worthwhile keeping a little extra money in the bank and rolling it out regularly over the year, just in case there is a more expensive emergency.
Something else to consider is what the stock market might do over the coming year. If you put all your money into the RRSP now and the market goes up quickly, you’ll benefit more by having the whole lump sum invested early on. However, if the market drops quickly after you deposit a large amount you’ll lose more than if you made smaller deposits over the year. I’m usually not one to try to time the market, preferring to take smaller risks and accept smaller rewards. With this in mind, making bi-weekly payments will be less impactful (for good or ill) than one large deposit early in the year.
In short, I feel the cautious approach, all other things being equal, is to set up the bi-weekly deposits into your RRSP. It’ll give you a bigger cushion in your bank account and avoid side-effects of market fluctuations. This might also be beneficial in the long run because it’s good to get into the habit of making regular investment contributions. People who make one large deposit and then forget about their investments are less likely to get back into the habit of investing for their future later. Bi-weekly deposits into your RRSP or other investment accounts is a good habit to get into when you’re planning for your retirement.
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