The 2016 RRSP Deadline: Keeping Things Balanced

The 2016 RRSP deadline is February 29, 2016. That means income taxes are around the corner. Wifey and I were waiting until her final paycheque before the deadline to transfer her company match to her company group RRSP. This was to maximize the amount the amount her company put into her GRRSP without having to do too many transfers.

To recap, every cheque, wifey contributes 5% into her GRRSP. Her company matches the entire 5%, but puts the money in an unregistered account. If we want to move this money into her GRRSP, we need to call Sunlife to initiate the transfer. Seeing how we're worried about hidden fees and the like, we tend to do the transfer once a year before the RRSP deadline and her final pay cheque before the RRSP deadline.

Once the transfer is complete, I can determine how much more to contribute to her RRSP (via Questrade) in order to utilize her entire available contribution room.

As wifey is in a higher income bracket, it kind of makes sense to max out her RRSP contribution room. Of course, some would call it poor planning as we could have sent in a form to ask the Government to take less tax off her cheque since we were going to be using the money in her RRSP anyway. However, the process needs to be done yearly, and it's hassle if something were to happen that caused us to miss a few transfers into her RRSP. (It's a hassle in that we'd owe money to the Government since we asked them not to take too much tax from us.)

Some would even argue that maxing out her TFSA before her RRSP is the way to go. Well, we haven't been transferring money only into her RRSP. I've kept track of each of her contributions (both the RRSP and TFSA). Despite maxing out her RRSPs, we've managed to contribute over 50% more into her TFSA in 2015 than her RRSP.

Why did we do this? Well, the main reason was for the "just in case". The unforeseen complications in life. The emergency "I need some money for a short while" situations. Fortunately for us, we didn't have any of those last year.

Why else? Well, RRSPs are supposed to be for retirement savings. TFSAs are generally used for more short term to mid term goals. We just happen to use our TFSAs as retirement savings as well with an eye towards emergencies.

For more immediate emergencies, we have a small cash reserve at home and in bank accounts that equate to one month's worth of expenses*. For emergencies lasting more than a month, wifey has a TFSA e-series account worth over $10,000 that we can dip into.

Some people would chide us for keeping our emergency fund in mutual funds. However, despite the latest market turmoil, our account has only dipped $300 from the book value (contributions + distributions). Despite this, I only really consider $7,000 of the $10,000 in this account as money we can use. I'm assuming 30% of this money will be eroded if we require the funds during a market crash.

If you're in the lowest income bracket or you're in one of the lower brackets, then maybe it would make more sense to put your money in a TFSA first. It really depends on everyone's situation and what they are comfortable with.

In our case, we're capable of putting money in both the RRSP and TFSA, and will take advantage of a tax refund come March. That refund will then be used to give us a jump start into 2016's RRSP contributions.

Pretty cool, right?

*Actually, the past few months, it's creeped up to 3 months of expenses! Yikes... I'll need to do something about this later.


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