If you had to withdraw funds from your RRSP in 2010, the good news is that you still have until March 1, 2011 to make a contribution to help offset your withdrawal. Although you will never get your contribution room back for the amount you took out, at least you won’t suffer as many tax penalties by putting some or all of the money back.
However, before you decide to put the money back, make sure that you can truly afford to do so. If you don’t already have some money set aside for emergencies, then it is probably better to refrain from adding any additional money into your RRSP. Why? Because you are just as likely to end up having to make another RRSP withdrawal and then it defeats the purpose of contributing to an RRSP altogether. Just be prepared to pay some tax in the Spring.
When you invest in an RRSP, try to think of that money as not existing to you at all until you retire. That is the very best way to treat it if you want to benefit from it.
Until you are in a financial position to contribute to an RRSP without using it as an emergency fund, I would recommend that you use another type of savings vehicle that will better suit your needs.
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