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What is the benefit to contributing to my RRSP early in the tax year?

It's a sound strategy to contribute early in the tax year. Contributing at the earliest possible date rather than waiting for the deadline can make a big difference because your savings can generate more compound income. The difference really adds up!

Three people contribute $18,000 a year at 6% compounded annually:
Person "A" contributes in January at the beginning of
the tax year.
Person "B" contributes in December, at the end of the
tax year.
Person "C" contributes $1,500 every month.

At the end of 35 years, their RRSPs are worth:

Person RRSP Value
Person "A"
January, beginning of tax year  $2,126,176
Person "B"
December, end of tax year $2,005,826
Person "C"
Monthly, 12 months/year  $2,070,435

In 35 years, "A" has $120,350 more in their RRSP than "B"!

In 35 years, "C" has $64,609 more in their RRSP than "B"!

The example above is based on a constant 6% rate in order to illustrate the advantages of tax-deferred savings and compounded returns. Because actual interest rates fluctuate, the amounts shown do not necessarily represent the value you would actually accumulate in an RRSP.

Our TD Retirement Savings Calculator can help you determine your retirement needs and the savings required to reach your goals.


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