In your early thirties the mortgage, cars and kids are probably weighing you down. There’s no point in clearing out your bank account each month to put money in your RRSP if it means pulling out a high-interest credit card to pay for groceries.

Mortgages at this time are usually considered a higher priority because every time you make an extra payment on your mortgage you reduce the amount owed on the principal. If your mortgage interest rate is 5%, paying it off faster is like getting a guaranteed 5% return.

However, if you are a high-income individual in the top tax bracket, it’s better to maximize on your RRSP room before making additional mortgage payments. Take your tax refund and contribute it back into the RRSP, or even use it to pay down your mortgage to compound your savings.

If you have a pension you might be wondering if you still need an RRSP. For most people the answer to that is “yes”. With no pension, you can contribute up to 18% of your income to an RRSP each year. That amount is reduced if you have a private pension to reflect the fact that you are also contributing to retirement income through your pension at work.

Tips:

• If you are planning to use your RRSP for a down payment on your first home soon, you may wish to consider a more conservative, less risky portfolio at this point. You can always go back to an aggressive one later.
• Try and contribute 50% of any bonus into RRSP for your future and be sure to increase your automatic transfer if you have received a raise.
• Use any tax refunds you receive as a contribution to your RRSP, this will in turn generate a larger refund next year.
• It’s okay to skip RRSP contributions in the early years of your thirties, but don’t make the mistake of overspending and digging yourself deep into debt.
• If you’re not happy with your annual rate of return on your RRSP, be sure to ask your advisor how fees are calculated and how they affect the return on your investment.
• Evaluate your unused RRSP room, invest on a regular and consistent basis using automatic transfers and be sure to review your asset allocation.
• If you stand to collect a very generous pension in retirement, having a large RRSP would result in that money being taxed heavily. If that is the case, use any extra funds to pay down your mortgage and max out your TFSAs.