RRSP Loans

Borrowing to contribute to your RRSP makes cent$

What do you do if the RRSP deadline is fast approaching and you don’t have the money to make a contribution? Simple. Borrow it.

Your RRSP contribution is an important part of ensuring a secure financial future.  While it is preferable to use your existing savings to contribute to an RRSP, it is better to borrow than not to make a contribution at all if money is short.

Putting off your RRSP contribution can impact your future cash flow and your retirement lifestyle.  For starters, forgoing your RRSP contribution could reduce the tax refund you receive.  It could also impede your ability to build a comfortable tax-sheltered retirement portfolio.  Finally, it’s more difficult to save thousands of extra  top up your RRSP years down the road using the carry forward provision rather than making regular RRSP contributions now.

Even if money is tight, borrowing to make an RRSP contribution makes good financial sense, provided you pay down the loan quickly.

Keep in mind that interest on an RRSP loan is not tax deductible.  However, RRSP’s have enough tax advantages to make carrying a short-term debt worthwhile.  Not only will you receive an immediate tax deduction, but also your RRSP investment compounds on a tax deferred basis for as long as it remains in the plan.  In most cases the immediate tax saving, plus the tax-deferred growth inside an RRSP will far outweigh the short-term interest costs of the loan.



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