If you have not made your 2003 RRSP contribution yet, do not panic! There is still time. The deadline is March 1, 2004 for contributions to apply to your 2003 taxes. It may be to your advantage to make a catch up contribution for 2003. In recent years income tax rates have been decreasing. This means that tax refunds may be worth more money this year than next.

First you must determine your contribution limit. You can find this on your Notice of Assessment from last year's income taxes, or by contacting Canada Customs and Revenue Agency (CCRA) at 1-800-959-8281.

Once you know your limit, you have some decisions to make. If you have the money, buy your RRSP. If not, you may want to consider a RRSP loan. With the current low interest rates, this option may be a very affordable way to make your contribution. Many companies are offering RRSP loans at prime interest rates (the best rate offered to the best customers), and some allow you up to 90 days to make your first payment. This may be enough time to receive your Income Tax Refund and apply the proceeds toward your loan. There may be added risk when borrowing money to invest, whether or not purchasing registered investments. Be sure to consult your financial planner prior to making this decision.

If you are a couple, try to grow your retirement savings equally by purchasing a Spousal RRSP. The person with the higher income may receive a greater tax refund. This will also help to split your income during retirement. Two people earning $25,000 each will pay much less income tax than one person earning $50,000.

Finally, it is important to diversify your RRSP. Guaranteed deposits are common choices, however, mutual funds and stocks are playing an increasing role as interest rates have declined in recent years. You are also permitted 30% of your RRSP to be held in foreign investments. Using all of these strategies has the potential to lower your risk and produce better long-term results. It’s always best to seek the advice of a financial planner to assist in making these important decisions.

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.