RRSP Deadline is March 1st, 2021

For those of you who contribute to RRSP’s there is a deadline coming up. If you want the deduction on your 2020 tax return you need to make the contribution by March 1st, 2021.  If you prefer to save for your retirement with a TFSA, there is no deadline as there is no tax deduction for a TFSA contribution.

 I have explained my preference for TFSA’s over RRSP many times before. But, for those of you who missed it, here is my usual example:

Let’s say you want to invest in Shopify, you could do that in your RRSP, your TFSA or an investment account which is not tax sheltered. If you contribute $5,000 to your RRSP and buy Shopify shares you will get a deduction for $5,000 on your tax return. If you contribute $5,000 to your TFSA and buy Shopify you will not get a tax deduction. In ten years if Shopify shares are worth $50,000 and you remove that $50,000 from your RRSP you will pay tax on $50,000. If you remove $50,000 from your TFSA you will pay zero tax.  Zero tax is better than tax on $50,000.

The TFSA is the better long range plan, but people have a hard time giving up the immediate gratification of the RRSP tax deduction. If you want the short term gratification in 2020 the RRSP deadline is March 1st, 2021.

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Painless Financial Training Group Inc. with Debi Peverill

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