RRSPs: Don’t leave it til tomorrow!

Let’s hear it for procrastination! Pro! Cras! Ti! Nate!

No? Well, maybe later. . .

Let’s face it, we all procrastinate. Young and old. Some forms of procrastination are fairly trivial (are you blowing off some task right now by reading this on your computer at work?) and some are far more serious (when those CRA folks say “tax deadline” they mean it!). Procrastination has a storied history. Nine months in the womb? Wow, really? Most of us are done in six. Those last three were pretty much just floating around. And who doesn’t recall fondly those sleepless final days at end of term turbo-writing that research paper we had all term to work on but waited instead until the last minute? But as Einstein—himself a notorious procrastinator, mused, “pressure produces genius.” (Okay, Einstein wasn’t a procrastinator and he didn’t say that. But I was too lazy to find out who really said it.)

We procrastinators will use any excuse we can not to do what we know we should (I’d love to, but it’s Thursday. . . ).

Er . . . so what was my point?

Oh yeah. Right. (I knew I’d get there eventually.)

It’s RRSP time.

And just in case you think an RRSP is a greeting in pirate-speak, here is a handy refresher courtesy of ScotiaBank: A Registered Retirement Savings Plan (RRSP) is a government-regulated investment account with special tax benefits to help you maximize your retirement savings.

Deductible contributions to an RRSP help reduce your taxes, and any income you earn on your investments while in the plan grow tax-deferred.

Still with me? I didn’t think so. Look, it’s pretty boring stuff. No wonder so many of us procrastinate! But it’s really important: an RRSP is your ticket to financial freedom, and the sooner you come to terms with them (yeah, I’m talking to you procrastinators) the better. After all, isn’t a few minutes and a bit of cash invested now worth it if it means a whole bundle of cash and no effort later on? That’s the thing about freedom: it isn’t free. But here’s the best part about the RRSP: it doesn’t have to cost you that much— if you are smart and . . . yup . . . stop procrastinating.

So how bad are we?

As Financial Post reporter Melissa Leong has written, according to a TD survey as much as 60 percent of Canadians “wait until the last two weeks before the March 1 deadline to contribute to their RRSPs.” And 45 percent of the contributions that are made are of the “lump sum” variety. A lump sum is another word for “what I had at the moment.” It’s better than nothing, but not by much.

Leong asked Timothy Pychyl, an associate psychology professor at Carleton University, why we procrastinate. The short answer, according to Pychyl, is the seduction of short-term gain versus long-term benefits. Meaning, it’s more fun to buy ourselves a toy now than take that money and invest for the future. So what would that future look like?

Leong asked a wealth management expert. According to Kim Parlee, vice-president of TD Wealth Management, “if you put in $50 a week for 30 years, assuming a 6 percent return on the markets, you’d have about $219,000. If you decide to do it once a year and you did $2,400 a year right before the deadline, you’d have $189,740.”

What should procrastinators do?

Here’s the good news: setting money aside for your future doesn’t have to be like pulling teeth. In fact, it’s really easy.

Parlee recommends a monthly—or, even better, weekly—amount you are comfortable with and setting up an automatic money transfer. That way it’s invested before you have a chance to fantasize about spending alternatives. Fifty bucks a week might seem like a lot, right? But it isn’t really . . . especially if you’ve ever ordered a beer at the ball game. The point is, you won’t miss what you never had. But over time that fifty bucks a month is building through growth and interest and you don’t have to a do a thing.

Seriously, is that not the procrastinator’s ultimate dream investment?

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