How much should you invest in your RRSP?

Don’t be a dope. Start saving for retirement early and invest in your RRSP.



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Are you planning on contributing to your RRSP for 2012? Will you make a smaller contribution than you did last year? According to the Stats Man, even as our spending on crap has gone up, RRSP contributions have been on a steady decline. Fewer people are contributing and the amount we’re socking away is falling too. In fact, we only used about five percent of the eligible contribution room available in 2010.

This totally blows my mind. The tax-man wants to hand you back money and you’re going to let him keep it? Really? You can’t find a single thing—pay down debt, boost your TFSA, go on vacation—that you’d rather do with that “tax” money?

If you think that because you can’t dump a whack of money into an RRSP it’s not worth thinking about, you’re a dope. Every dollar you save now is a dollar plus growth that you’ll have when it comes time to hang up your spurs.

Put $50 a month into an RRSP and give your money 25 years to grow at an average return of 5% over the long-term. You’ll almost double your money: you’ll have put away $15,000, but you’ll end up with $29,775.

Give yourself more time and the results are even better. Let’s say you start contributing at 25 and do so until the normal retirement age of 65. You’ll have $76,301 just by socking away $600 a year. C’mon, you can find $600 a year.

Up your contribution to the mean contribution for 2008—$2,680—and in 25 years you would have $133,394. In 40 years you would have $341,829.

Don’t be sad about how little you can save today. And don’t let a small contribution stop you from starting. Find the first $50 a month and aim to get to the $233 a month you need to meet the median contribution amount. Then keep going from there.

You can use your tax refund to boost next year’s RRSP contribution. That’s a great way to build up your savings. Allocate half of your next raise to savings. And you know all that money you’ve been wasting on some bad habit? Why not use it to build a future instead.

Plan now to start contributing month and this time next year you’ll have formed a habit that’ll do you good for years to come!

4 comments on “How much should you invest in your RRSP?

  1. Thanks for the motivation just called my bank and upped my monthly contributions from $25 to $50! Done and done!


  2. "…an average return of 5% over the long-term."
    That is a mirage, can't count on it in these uncertain times.
    Also, those in the lowest tax bracket should forget about RRSP's.


  3. I think that 5% return is not realistic. In the last 5 years I only sow negative return, so I am not sure that money in RRSP is a good investment. You save the taxes now, but the money depreciate at least (in not negative grow) with the annual inflation rate (at least 2.5 % annually), so in 20 years, it is move then you saved in taxes today. Why not paying into the mortgage directly the money that you plan to put into your RRSP – then it is not 43% into the mortgage is 100% of the money that you affort the save this year.


  4. The market has never shown a 10 year, on average, loss so a 5 year negative is not much to worry about. If anything, it’s good for you earlier because you’re buying more shares at a lower rate.

    And you can just as easily lose money on your house short term…


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