One final thought: You can do a bit of both. First, contribute as much as you can to your RRSP. This will generate a bigger tax refund than you would have received otherwise. Then you can take that refund and contribute it to your TFSA. Your email address will not be published.
Ask Bruce: a year investor wonders which plan is right. Comments Cancel reply Your email address will not be published. Today I see the wisdom in his words If you want to see your investment dollars grow, stay away from interest-bearing investments as the return does not even make up for inflation.
Report an error. Journalistic Standards. About The Star. More Opinion. The easiest and best way to start an RRSP is by having regular, automatic withdrawals taken from your bank account directly after payday. Mortgages and student loans fall into the gray area of debt when it comes to RRSPs.
These debts are usually long term and low interest. Student loans even carry a tax deduction themselves. Again, from a numbers perspective, when you are young, paying down your mortgage should take priority over most investments.
Paying down your mortgage faster now will save you a lot in interest payments in the future. As such, your mortgage should take priority, thanks to the guaranteed return you earn in interest savings. This is a fact that most people find disagreeable for reasons outside of the numbers.
There is a sense of future security that comes from maxing out your RRSP every year, regardless of whether you are making money in it or not.
This desire to balance mortgage responsibility with the psychological edge of investing for retirement has led to many different tax strategies. One of the most popular is the system of maxing out your retirement savings plan and using your tax refund to make an extra payment on your mortgage.
It keeps you in debt for longer than if you simply used the money against your mortgage instead of the RRSP limit, but it balances financial and psychological necessities. There is nothing wrong with investing for retirement while paying your mortgage. Doing so is much better than piling up consumer debt while paying your mortgage. If you do decide to go all out on your mortgage, you will still have to switch later and go all out on your RRSP once your mortgage is paid off.
In the end, this decision probably comes down to a personal choice. Should you borrow money to max out your RRSP? Generally, no. If your RRSP is your only investment vehicle, then you are better off borrowing to max it out and paying cash for something—a car, TV, etc. RRSP loans are of lower interest but not tax-deductible. If you have investments outside your RRSP, it might be better to max out your RRSP with available funds and then borrow for your other investment accounts.
Borrowing to invest in non-RRSP accounts will result in another tax deduction for the interest on the loan you used to invest. You must have a safety factor built in to your approach. Phil teaches you how to do it. The real secret to investing is not losing money, ever! Hello, I currently have 2 jobs which fall in the Quebec tax bracket 11,, or But every year I have to pay more back than someone who has 1 job.
Sometimes my total income is below and sometimes it is above, if it is above the MTG jumps to Is there a general rule of how much percentage of my income I should be contributing?
Tara, when people have one job, the HR people for the company know how much the person makes and bases the tax deduction on the amount of their pay. When someone has 2 jobs, it is up to you as the employee to monitor the tax rate.
If you do not want a big refund every year, you can do a TD1 form I think that is the form number with CRA and have one of your employers deduct a different amount. Some people like having a tax refund. One thing Jim did not mention or I missed reading it? That is the case if we died before having the chance to withdraw a big portion from our RRSP, then whatever left in RRSP will be added a whole chunk to our final tax return.
CRA win big! The trick to withdraw from RRSP is that if you take small amount each year to avoid of paying high tax, big balance left in there if you died will hit a much higher tax bracket anyway.
If you try to withdraw a good amount so that your RRSP account is soon depleted to avoid high tax when you die, you then will hit a higher tax bracket now, not yet to say to be crawled back from OAS. I am truly in this current dilemma. Hello, and thank you for the advice. This explains a lot for me. And do you happen to have an article that could provide me with more information on this? Thank you again and have a wonderful day, Shirley.
Would I make more money investing in stocks or rrsps at the age of 33? With putting in I do have that much room notice of assesment tells me that,every year thanks. You can put another lump sum into your RRSP the following year. What should I look for when getting an account? The TFSA is a much better and more flexible alternative. At your age, your financial priorities should be 1 pay off the credit cards and all personal debt.
In the long term, this is the best tax free Canadian wealth builder. This financial plan worked well for me and my children. Good Luck! Great post, thanks! Can you provide more details please? The post makes a lot sense! Thank you for good information. However one important part to be taken in consideration — the unofficial inflation rate. I mean how much actually the cost of living and the housing will rise. Remember, while your savings are tax sheltered, they are not protected against the ever rising costs.
You will have much more by the time of your retirement, but will be able to buy much less. Therefore only extra income should be saved to RRSP. Hi, I am a new immigrant and would want to start investing.
I am in the midst of trying to get familiar with all the Canadian financial lingo.
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