Rising cost of living affecting decisions around RRSP contributions

The deadline to contribute to a Registered Retirement Savings Plan (RRSP) is approaching – a significant date on the financial calendar for some.

“March 1, that’s when you have to have your RRSP,” says senior financial planner Darryl Smith.

Smith says those who can't maximize their annual contribution to RRSP will hand over more money to government.

"Well, you pay a little bit more money to the government in the form of income tax," he said.

Inflation hit a near 40-year high of 8.1 per cent in July 2022. Last month it fell to 5.9 per cent.

Still, Nova Scotians are doing what they can to put some money aside.

“I am able to save right now with my current circumstances but that’s with me having two roommates and only renting a single room,” says Tyler Schmalenberger.

Schmalenberger is able to deposit money in a tax-free savings account but he does not have a RRSP.

“With things right now, I would like to remain as liquid as possible just so that in the next year or so, I won’t feel so pinched,” he says.

Those who do have a RRSP say the drop in inflation is still not enough for them to be able to deposit the full amount into their plans.

“I will not be putting extra. I can do the bare minimum, my monthly donation is really the best I can do,” says Danielle Autran.

Despite people tightening their financial belts, Smith says it's wise to open and maintain a plan.

“RRSPs are still one of the greatest tax savings vehicles that you can have in Canada from an income tax standpoint, you’re getting money back right away,” Smith says.

Any contribution made after the March 1 deadline must be claimed as deductions on 2023 tax returns.