March 1, 2019 is the last day on which you can make a contribution to your mutual funds in a Registered Retirement Savings Plan (RRSP) that can be deducted on your 2018 tax return. If you’re thinking of skipping your contribution “just this once,” you might want to think again.

Opportunity cost

If you are now 55 and skip a single $5,000 contribution, you could end up with nearly $9,000 less in your RRSP by age 65, assuming an average annual return of 6%. If you skip a $10,000 contribution, that lost opportunity may rise to more than $17,900. The younger you are, the higher the potential cost. Using the same 6% assumption, skipping a $5,000 contribution at age 45 could cost you about $16,000 by retirement.

Skipping a contribution at age 35 has an even greater impact on retirement funding. A single $5,000 contribution missed could see you lose out on more than $28,700; skipping a $10,000 contribution could mean missing out on nearly $57,500.

Tax cost

Opportunity cost is only part of the story. Not contributing also means not being able to claim a tax deduction that could reduce your tax bill or maybe even result in a refund. And the higher your earnings, the more valuable that deduction becomes.

Your options

Perhaps the biggest cost of all is shortchanging your own retirement plans. If you have conflicting demands on your finances keeping you from contributing to your mutual fund RRSP portfolio, it may be time for a review. We can help you find an approach that keeps you on track to meet your retirement goals.