Doesn't it sometimes seem like technology takes care of everything except for the thing you really want it to take care of? Like deciding what to watch on Netflix? Or making you less distracted while you're hanging out with your kids? Or keeping track of the constantly changing/rolling over/back-dated/moving target that is your yearly RRSP contribution limit?
Yes, we are taking credit for solving at least one of those problems.
We built an easy, sophisticated RRSP tracker. We're not saying we're perfect — sometimes we leave our towel on the bathroom floor. But Wealthsimple is very very good at designing software that makes all the hard financial stuff easy (and attractive). Enter our new RRSP tracker.
If you have an RRSP with Wealthsimple, all you have to do to use it is turn it on. Log onto your account and click on your RRSP account page, and you’ll see a status bar that will say either “tracking contributions” or “not tracking contributions.” To opt in, simply click the “set up” button on the bar. Then we’ll ask you a short battery of minimally invasive questions about your contribution history (we might be investing geniuses, but we're not psychics). Like how much you deposited to RRSPs outside of Wealthsimple, and how much you’re contributing to your workplace retirement plan, if you have one. Then you're done.
We'll let you know if you're on track, we'll warn you if you're in danger of over contributing (the CRA will penalize you if you do) — we'll even calculate how much room you'll have left after your scheduled auto-deposits.
We pause here to ask: you have an RRSP, right? It's the best thing you can do for your (financial) future. An RRSP is a tax-advantaged retirement account (if you want a full definition, hit that link). And you should put as much into it as you possibly can. Why?
The government wants its citizens to save money for retirement. Because the math is simple: It’s less expensive for the feds to give up some tax revenue now than it is to take care of us when we’re old. And to incentivize us, they essentially pay us money to save money in an RRSP. How? Every dollar you contribute to an RRSP reduces your taxable income by a dollar. So you save money now, and then you earn interest on the government's money. To figure out how much you stand to save on your tax bill with an RRSP, check out this calculator. If you’re still confused, give us a call.
You pay tax when you take the money out — but when you retire, your tax rate is usually lower.
Plus there's something called compounding that means a dollar saved now is worth way more than a dollar saved later. So get started.
How helpful is a tracker? Remember that the government is the government, so contribution rules are confusing (and boring).
It starts out kind of easy. For the 2017 tax year, a Canadian can contribute up to 18% of his or her income to an RRSP up to a maximum of $26,010. Then it gets harder. How much have you already contributed? And did you max out your contributions for last year? And the year before that? Because every year you don't contribute the maximum amount, the extra room gets pushed to the following year. And the extra room keeps getting pushed forward as long as you’re working. And then calculate whether you already contribute to your company's GRSP plan, because that counts toward your limit? And then deal with the fact that you were contributing 18% of your income but you just got a 5% raise at your annual review.
If that is math you enjoy doing, then sure, maybe you do not need a tracker. But it's still nice to have one.
Last: You may be in for an unexpected yearly bonus.
If you're one of the many people whose employer automatically deducts income tax from your paycheques, and you put money into an RRSP, it's likely you paid too much in taxes. So the government will send you a nice cheque in a few weeks to reimburse you for your overpayment. (Which you're going to invest for your future, right?)
OK. We're pretty confident we've removed all your excuses. So get saving!
Wealthsimple makes smart investing simple and affordable.