Registered Retirement Savings Plans (RRSPs) are a powerful tool for building long-term financial security. But like most financial decisions, they work best when they’re part of a thoughtful plan.
There’s no one “perfect” way to use an RRSP. The best way is the one that fits your life, your goals, and your comfort level today. Every journey beings with a plan. We’re here to help you build a plan that works for your real life, now and in the future. Whether you’re just getting started or reviewing your plan years down the road, here are some common RRSP mistakes that people make, and what you can do instead to stay on track.
Waiting too long to start
It’s easy to put off saving for retirement when life feels busy and retirement feels far away. But even small contributions early on can make a meaningful difference over time.
Why it matters:
Starting earlier often means you can save less each year and still reach your goals.
Contributing without a plan
Putting money into an RRSP just to “get the deduction” can lead to mismatches between contributions, income level, and long-term goals.
Why it matters:
RRSPs work best when contributions are timed and sized strategically, not reactively.
Misunderstanding contribution limits
RRSP contribution room isn’t intuitive, and relying on estimates instead of official numbers can lead to confusion.
Why it matters:
Check your CRA Notice of Assessment to confirm your available contribution room. Knowing your limits helps you avoid penalties and make the most of your savings opportunities.
Overlooking what's inside the RRSP
An RRSP is just the container. In this case it truly is what's inside that counts. The investments inside it determine how your money grows. Being too cautious, too aggressive, or not diversified enough can affect long-term results.
Why it matters:
Choose investments that reflect your comfort level, timeline, and goals. As life changes, your investment mix should evolve too.
Using an RRSP when another investment option might fit better
RRSPs aren’t always the best first choice. Depending on your income and goals, a TFSA or First Home Savings Account (FHSA) may be more effective.
Why it matters:
Think about what you’re saving for and when you’ll need the money. The right mix of accounts can give you both flexibility today and security for tomorrow.
Withdrawing from an RRSP too early
Using RRSP funds for short-term needs can be costly. Withdrawals are taxable and permanently reduce contribution room (outside of programs like the Home Buyers’ Plan).
Why it matters:
Whenever possible, keep RRSP funds focused on long-term goals. Early withdrawals can undo years of tax-deferred growth. If you need access to savings sooner, other options may offer more flexibility.
Relying too heavily on RRSPs alone
Some people focus entirely on RRSPs and miss the benefits of a more balanced savings strategy.
Why it matters:
Different savings tools serve different purposes. Combining RRSPs with TFSAs, pensions,and other savings options can help manage taxes, improve cash flow, and create more flexibility in retirement.
Not coordinating RRSPs with a spouse or partner
Failing to consider spousal RRSPs or income splitting opportunities can lead to higher taxes in retirement.
Why it matters:
Planning together including spousal RRSPs, can help smooth income and reduce taxes later on.
Forgetting to adjust the plan over time
As retirement approaches, some people don’t revisit their RRSP strategy or plan for the transition to retirement income.
Why it matters:
Regular check-ins help ensure your RRSP continues to support your goals, especially as timelines shorten and priorities shift.
Leaving everything until the deadline
Waiting until the RRSP deadline can lead to rushed decisions and missed opportunities for growth earlier in the year.
Why it matters:
Contributing throughout the year can make saving feel more manageable and give your money more time to work for you.
Smart tip: Put your savings on autopilot and have smaller pre-authorized amounts deducted from your chequing account regularly throughout the year. You’ll get the advantage of dollar cost averaging, improve your chances of maxing out your RRSP every year and get the advantage of tax-deferred compound growth working for you earlier.
Talking to an SCU wealth advisor on a regular basis can help you stay on top of your progress, explore new opportunities and plan for the next step on your financial journey.
