It's never the wrong time to be thinking RSP contribution and of course it's never the wrong time to be thinking about paying down your mortgage either .... so, since we're all fed up with the recent doom and gloom in the press about the stock market melt-down, elections on both sides of the border, the global financial crisis etc I thought a little change of subject would be in order.
The age old question ... paydown my mortgage or put extra contributions into my RSP ?
This dilemma never seems to go away for those thinking of getting ahead with their finances.
Well, there is no correct answer other than "do both".
Contribute all year to your RSP through regular deposits. This eases the process so that you aren't scrounging or worse yet, borrowing money at the last minute to make your RSP contribution by the deadline.
Also, if you are contributing regularly and purchasing units of a mutual fund, you can take advantage of dollar cost averaging in your registered investments. If your employer has a matching program then by all means take advantage. The contribution comes right off your paycheque so you don't even miss it after a while and your employer may match a portion of your investment which means you automatically make a return on your contributions.
When the refund comes don't fall into the temptation of taking a quick trip to Las Vegas .... put the money down as a prepayment on your mortgage which will save you interest costs in the long run.
Even if your refund is only $1,000.00 that is $1,000.00 you do not have to pay interest on and since your principal balance is reduced, there is less money from every payment going towards interest and more going to principal.
Think of your mortgage prepayment as an investment. You're investing that $1,000.00 and saving interest on it rather than paying interest on it over the rest of the term of your mortgage.
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