Crunch time is almost here, and most of us will concentrate mainly on the immediate tax break received from RRSP contributions. At this time of the year it's far too easy to overlook the other advantages of contributing to your RRSP. The tax refund is obvious and immediate. Today we will focus on some other reasons to contribute to your RRSP.

Let us not lose sight of the fact that the primary purpose of RRSP savings is to provide a source of retirement income. An especially valuable objective if you do not have a pension plan, or your plan is insufficient. Government programs, such as Old Age Security and the Canada Pension Plan are also available, however many feel these plans are meager to meet their projected retirement income needs, or may not be available in the future.

Many employers are reducing or eliminating their corporate-sponsored pension plans. They are introducing the concept of self administered retirement saving plans. In lieu of a pension plan, employees are offered a percentage of salary that can be directed into any number of retirement saving arrangements as selected by the employee. This trend is increasing the awareness of RRSPs, but can also place a great deal of responsibility on employees who have never had to deal with savings, investment and retirement options.

Aside from the immediate tax refund, RRSPs have additional tax benefits. Whether you save in a guaranteed interest account, mutual funds or in equity type investments, your RRSP grows tax-free. Income tax is deferred until you begin to draw an income at retirement. Most people expect they will be in a lower tax bracket during retirement and therefore a permanent tax saving is established.

Keeping in mind that your RRSP is a source of retirement income, you must first determine the level of income you will need at retirement. Add up the income that will come from government and private pension plans. Then calculate if you will need any additional savings to meet your income objective. If you have a shortfall, don't procrastinate any longer. You've got till March 1, 2001 to make your year 2000 RRSP contribution. Make it now and commit to a savings plan that will meet your goals. Beyond the tax break you will have peace of mind and greater control over your retirement years.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.