In the beginning, many people have difficulty finding the money to make their maximum allowable contribution. The easiest way to start is to "pay yourself first" by contributing to your RRSP. Once you begin to see the growth in your capital, you'll be motivated. Whatever ability you think you have to contribute, the best growth in your plan will be achieved when you contribute your allowable maximum in each of your working years. 

One investor contributes $2,000 per annum for the first eight years of her career from age 19 to age 26. No more contributions are made until she retires at age 65. Her RRSP continues to grow through compounding at an annual rate of 10% on her original investment of $16,000. Meanwhile, her brother contributes nothing to his RRSP until he reaches age 27. He then makes a $2,000 contribution in each of the 39 years until he too retires at age 65. 

With 10% compounded annual returns, the brother's plan grows to $883,185 by retirement - a respectable eleven-fold increase over his $78,000 investment. His sister's plan, however, has grown to $1,035,160, representing a 64-fold increase over her $16,000 of contributions. That's the value of starting early with long-term compounding in an RRSP. You may not have started your RRSP at age 19 or even age 29, but the earlier you begin, the greater the opportunity your RRSP has to grow. 

Contribute Early in Life*

	Sister	Brother
Value of RRSP	$1,035,160	$883,185
less amount invested	16,000	78,000
Earned in RRSP	1,019,160	805,190
Increase in  original investment	64 times	11 times

* Compounded annually at 10%

Contribute Early In The Year
If you're like many investors, you will likely wait to make your 1995 RRSP contribution until right before the RRSP deadline of February 29, 1996. This year, why not try to also make your 1996 contribution early in January or February of 1996. Your RRSP will grow to a larger value, simply by changing the time of the year when you contribute. Investing 12 months earlier than usual means that your investment income will compound tax-sheltered in your plan for almost an extra year. Once you make the change in timing, you'll be on a new contribution schedule and your RRSP will continue to benefit from the "early advantage" year after year. 

Value of your RRSP*

$5,000 contributions made annually	Start of Year	End of Year	Early Advantage
Year 10	$87,660	$79,690	$ 7,970
Year 20	315,010	286,380	28,630
Year 30	904,720	822,470	82,250

* Compounded annually at 10%

For many people, starting a pre-authorized chequing plan (PAC), which invests a set amount each month in a mutual fund, is the simplest method of all to ensure regular RRSP contributions. In fact, as a result of the benefits of compounding, a $100 monthly investment can produce better growth than a $1,200 contribution at the end of each year. 

Value of RRSP after 25 years*

Annual Compound Rate of Return	8%	10%	12%
Contribution Method
$100/month	$95,100	$132,680	$187,880
$1,200 lump sum	87,730	118,020	160,000
PAC Advantage	7,370	14,660	27,880

*Compounded annually at 10%

Mutual fund investors can acquire international diversification in an RRSP in two ways. The first involves mutual funds that offer you some participation in foreign markets and which are fully eligible as RRSP investments. Funds such as Dynamic Global Bond Fund invest in a variety of securities issued by Canadian corporations and governments and which are denominated in foreign currencies. 

Alternatively, under existing RRSP legislation, investors are allowed to hold up to 20% of each RRSP in foreign investments. Your financial advisor can arrange for you to hold up to the full 20% using foreign-content eligible Dynamic mutual funds. Dynamic Global Partners Fund is an excellent choice for the foreign content portion of your RRSP. 

RRSP Contribution Limits

Tax Year	1995	1996	1997
% of Earned Income  for the previous year	1994	1995	1996
To a maximum of	$14,500	$13,500	$13,500

Canadian taxpayers who are eligible to contribute to an RRSP now receive notice from Revenue Canada of their contribution limit and pension adjustment with their income tax Notice of Assessment. In the case of individuals who are also members of an RPP or a DPSP, this limit is subject to a further pension adjustment * which reflects the benefits that accrued to you during the year under employer-sponsored plans. 

The February 1995 budget reduced the "cushion" allowed for over contributions from $8,000 to $2,000. As in the past, any over contribution you have made will be applied first as if it were a 1995 contribution to your RRSP. Some investors may wish to consult their financial advisors or accountants before making additional contributions in 1995 and to determine the effect past over contributions will have on the amount they can contribute in 1996. 

*The pension adjustment number to be used in most people's 1995 RRSP calculation will be the contributions they and their employers made to a pension plan in 1994 or contributions made by an employer to a DPSP for the 1994 taxation year. The exact figure can be found in box 52 of your 1994 T4 slip which you received before the end of February 1995. 

While not everyone can save enough to contribute the maximum each year, you can carry forward any unused portion of your allowable contribution and put it into your plan another year. Don't let the carry-forward rule be a way of avoiding disciplined investing. 

Another way for you to maximize your RRSP is the ability you have to transfer any lump-sum retirement allowances on a tax-free basis to your RRSP. The limit is $2,000 per year of employment for 1995. Furthermore, you may transfer an additional $1,500 for each year, prior to 1989, that you worked for a company and were not a member of its pension plan or DPSP. Making this type of contribution means you can defer paying taxes on your retirement allowance until it's withdrawn from your RRSP. The February 1995 budget eliminated the transfer for years of employment after 1995.