If you’re like most people, the thought of a simple four-letter investing acronym can stir a grief-induced headache, at best. To help you deal, here is a list of some common RRSP investing errors:
•According to financial experts, many people don’t look into the fees involved. The fix: Always ask, as sometimes investors don’t realize there’s a yearly account fee, or any other hidden fees involved along the way.
• Some people think it’s best to contribute to an RRSP in one lump sum, but it may actually be a better investing strategy to contribute to your account on a regular basis. Doing so means you can take advantage of the ups and downs of the market and invest accordingly.
• Many people wait to pay off all their debt before saving or investing, but this means they would miss years of growth for their investment, and in the event of a financial emergency, would have no funds to draw from.
• When investing, it’s important to account for the impact of inflation; even though it may feel safer to invest conservatively, doing so may not offer enough growth potential.
• If you withdraw from your RRSP early, not only are you taxed in full, but you might also incur a fee. The money in an RRSP is free to grow and accrue interest on a tax-sheltered basis, but you will be taxed on the growth of your investment when you pull money out.