Deadline looms for 2011 RRSP contributions

TORONTO — There’s still a small window of time for RRSP procrastinators to make that lump sum contribution and reap some tax rewards, but the clock is quickly ticking down to a midnight deadline.

TORONTO — There’s still a small window of time for RRSP procrastinators to make that lump sum contribution and reap some tax rewards, but the clock is quickly ticking down to a midnight deadline.

The deadline to contribute to your registered retirement savings plan and deduct that contribution from your 2011 tax return is midnight.

But there’s still time to get to a financial institution and make a lump sum contribution.

Many banks and financial institutions are offering extended hours to give procrastinators extra time to make their contributions and some offer special interest rates on RRSP accounts.

But if you miss the deadline, you still have options.

Your contribution limit will carry over to next year, giving you plenty of time to set up a monthly contribution plan to avoid the deadline rush next year.

“The small deadline is the tax deadline, the large deadline is retirement,” said Sun Life financial adviser Brian Burlacoff.

Sun Life Financial’s (TSX:SLF) annual Unretirement Index poll, released last week, found that only about three in 10 Canadians surveyed said they plan full retirement by 66.

Around the world, a retirement crisis looms as debt-strapped countries scale back benefits, raise the retirement age or make other moves to deal with rising obligations and weak economies.

In Canada, the federal government wants to scale back the long-term costs of Canada’s Old Age Security program, and has met harsh criticism from critics and the opposition over suggestions Ottawa may raise the OAS retirement age to save money.

“People are starting to see that the government’s not going to be there for us when we’re 65 for example, people are starting to realize they’ve got to fund this themselves,” Burlacoff said.

“But what we’re not so good at is doing a plan.”

Recent polls have suggested a majority of Canadians wait until the last minute to make an RRSP contribution — if they do so at all.

A TD Bank survey released last week found 58 per cent of respondents said they waited until the last two weeks before the deadline to contribute.

Nearly half of those surveyed said they contribute to their RRSP’s only in lump sum payments with 44 per cent saying they didn’t feel they had enough money to contribute throughout the year and thought it was a better strategy to wait until the last minute.

Meanwhile, CIBC issued its own poll last week that found about one quarter of Canadians who planned to make a contribution this year still had not done so.

Half of them said they planned to wait until the final two days before contributing.

Such surveys are routinely done by banks, insurers or other financial companies to research their customers’s views and promote financial products and services such as mutual funds and wealth management and financial planning advice.

Burlacoff said those who miss the 2011 deadline should turn their focus to putting a plan in place for the 2012 tax year — such as a biweekly or monthly automatic deduction system.

But Burlacoff said Canadians are getting better at putting money into their RRSPs as headlines amass over Canadians living longer and facing tougher financial choices in their golden years.

“Our contributions are actually up this year,” he said.

“At least in our client base people are getting a little more confident so were probably up about 20 or 30 per cent over last year.”

The decision to invest in an RRSP has been complicated in recent years by the introduction of tax-free savings accounts.

Although TFSAs don’t provide a tax deduction for money going in, money taken out later, including interest, dividends or capital gains is not subject to taxation.

RRSP contributions, on the other hand, are tax deductible going in but money taken out in retirement, including any gains, is subject to taxation.

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