Biggest RRSP mistakes that you should avoid

It's tax season, and for many Canadians that means it's time to start thinking about their Registered Retirement Savings Plans (RRSPs). But as with any financial decision, it's important to avoid making mistakes that could cost you in the long run. Here are some of the biggest blunders to watch out for when it comes to RRSPs.

Mistake #1: Not taking advantage of company matching

The biggest RRSP mistake you can make is not maximizing your match. If your company offers a match, they are essentially offering you free money.

The average diversified portfolio goes up around 8% every year. If your company is offering to match whatever you contribute to your RRSP, they are essentially offering an immediate and essentially guaranteed (assuming immediate vesting) return on your investment.

Mistake #2: Not having a plan

RRSPs are a powerful tool for saving for retirement, but they're not a one-size-fits-all solution. Before you start making contributions, it's important to have a clear plan in place. This includes understanding your retirement goals, determining how much you need to save, and figuring out the best investment options for your situation. Without a plan, you could end up making contributions that don't align with your long-term goals.

Mistake #3: Not taking advantage of tax deductions

One of the biggest benefits of RRSPs is the tax deduction you receive for making contributions. But if you don't claim this deduction on your tax return, you're essentially leaving money on the table. Make sure to claim your RRSP contributions to get the full benefit of your savings.

Mistake #4: Not diversifying your investments

Diversification is key when it comes to investing, and RRSPs are no exception. By spreading your money across a variety of asset classes, you can potentially reduce the impact of market volatility on your portfolio. Don't make the mistake of putting all your eggs in one basket - diversify your RRSP investments to increase your chances of success.

Mistake #5: Withdrawing money before retirement

While it's possible to withdraw money from your RRSP under certain circumstances (e.g. the Home Buyer's Plan or the Lifelong Learning Plan), it's generally not a good idea to dip into your retirement savings before you're actually retired. Not only will you lose out on the tax-sheltered growth potential of your investments, but you'll also be hit with additional taxes and possibly even penalties.

Mistake #6: Neglecting your RRSPs

Finally, one of the biggest mistakes you can make with your RRSPs is simply ignoring them. Make sure to review your investments regularly and make adjustments as needed to ensure your portfolio aligns with your retirement goals. A little bit of maintenance can go a long way in helping you reach your financial objectives.

RRSPs are a powerful tool for saving for retirement, but they're not without their pitfalls. By avoiding these mistakes, you can set yourself up for success and work towards a comfortable and financially secure retirement.