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rrsp investing

Excuses, excuses! People come up with all kinds of excuses for any number of reasons or occasions: the dog ate my assignment; the cheque's in the mail; I'll clean the driveway when it stops snowing.

The same principle applies to Canadians contributing to their Registered Retirement Savings Plans (RRSPs). Canadians now have about $500 billion in unused RRSP contribution room, and that number is growing every year.

"Everybody procrastinates about something, like going to the doctor," says Sara Kinnear, Senior Tax and Estate Planning specialist with Investors Group in Winnipeg. "But when it comes to money and retirement planning, there are about seven top excuses that we see the most."

The first is that I'm young, I have lots of time to worry about my retirement and it's too far in the future to worry about now.

"The truth of the matter is that the sooner you start saving the longer your money has time to work for you," Kinnear says. "We try and encourage people to start saving as soon as they start working, but that's often hard to communicate to a young adult whose retirement is a long way off."

Financial advisers and experts recommend that people start an automatic or pre-authorized withdrawal plan from their pay cheques as soon as they can. "Once people see how compounding can grow their savings over time, they are much more likely to start a plan and stick with it," Ms. Kinnear says.

Another common excuse is that there are too many other financial priorities, such as saving to buy a house or car, a vacation or a child's education, to sock away some money in an RRSP.

"There will always be competing interests for your money but you've got to make some decisions - like do I want those lattes now or a good retirement later," Ms. Kinnear says. "If you look at your budget you probably can find some wiggle room, things you can cut out like lattes or restaurant meals that can fritter away your money."

"I'll catch up later" is another common theme for not contributing to your RRSP. "This is the clarion call of all procrastinations, like waiting till the last minute and pulling an all-nighter to do your term paper," Ms. Kinnear says. "You get it done but realize at the end that it could have been a lot better if you had given it more time."

Some people today - although not as many as in the past-- still are under the impression that the government will look after their retirement. Unfortunately, support from government programs such as the Old Age Security, Canada Pension Plan, and Guaranteed Income Supplement can amount to about $10,000 a year - a nice little sum but certainly not enough for a comfortable retirement for most people.

Some people reason that they shouldn't bother to put money into an RRSP now because they will have to pay tax on it later.

One of the advantages of RRSPs is that you likely will withdraw the money at a time when you are in a lower tax bracket, so you pay less tax.

Another common excuse is that it's not the right time to invest in the market. "The time may never be right but you've got to start somewhere," Kinnear says. "If you've got 30 years to retirement you've got time to weather the ups and downs. The key to investing is not timing the market, but the time spent in the market."

The last most common excuse is ignorance - not knowing what to do. Kinnear suggests sitting down with a certified financial planner and discussing your situation and goals. Most of the major Canadian banks have financial planners on staff that can help.

"It's important that financial planning is not about pushing financial products but determining your goals and matching your investment with those goals," Kinnear says.