Borrowing money to contribute to your RRSP might sound a little crazy, but it can make a lot of sense – we promise.
Over the years, you may have earned RRSP contribution room but, for whatever reason, you haven’t been able to follow it up with the actual contributions. You might already know that compound interest means it’s important to invest in your retirement early, but that doesn’t mean you have the cash on hand to do it.
So, what do you do? One option is an RRSP loan.
One of the great things about an RRSP is that your contributions are tax deductible. They actually count against your income, so in the government’s eyes your income goes down every time you contribute to your RRSP.
Of course, there’s a limit to the amount you can deduct each year, and that limit is what we’ve referred to above as your contribution room. You can carry the extra room you gain each year into following years, which is how you can end up with lots of contribution room.
That unused room means you can make a large contribution to your RRSP, which can lead to a big tax refund. If you’ve borrowed money to make that contribution, you can put that refund directly onto the loan which will put you well on your way to paying it back. Meanwhile, your pumped-up RRSP is earning interest and growing for your retirement.
Call our Contact Centre at 1.866.863.6237 to learn more about RRSP loans and how they can work for you.