Staying the course by saving systematically and conscientiously throughout the year is an excellent habit to adopt. It’s time to discover the little-known benefits of your good RRSP saving habits and how you can take advantage of them.
- Want to purchase a starter home? You can, thanks to your RRSP!
Do you need access to liquidity to buy your first home? Did you know that you can use the money in your RRSP without being subject to unfavourable tax impacts? With the Home Buyers’ Plan (HBP), you can borrow up to $35,000 from your RRSP with no tax withheld on the amount withdrawn. The HBP allows you to repay the entire amount to your RRSP over a period of 15 years without interest.
- Want to achieve your career goals? Again, you can with your RRSP!
Are you or your spouse looking to advance to a higher position or are you looking for a career change and are motivated to go back to school full time to achieve your career goals? With the Lifelong Learning Plan (LLP) you can withdraw up to $10,000 from your RRSPs per calendar year to finance your return to full-time studies. In addition, if you repay the amount borrowed within ten years, no taxes will be withheld.
- Want to reduce taxes at retirement? Your RRSP is still the answer!
Does your spouse earn less than you, their retirement income is likely to be lower and you want to contribute to an RRSP in their name? With income splitting, you can contribute to your spouse's RRSP and these payments will be deductible from your income.
That being said, withdrawals at retirement will be taxed at your spouse’s tax rate, which is lower than yours, so you will benefit from a tax deduction. This is possible until your spouse turns 71, even if you, the Contributor, have reached age 71.
If a temporary lack of liquidity prevents you from contributing to your Registered Retirement Savings Plan (RRSP), an RRSP loan can be an advantageous option to allow you to continue to make or even increase your RRSP contributions and then use your income tax refund to pay off part of the balance of your loan, thereby repaying it more quickly.
In addition, while taking advantage of a competitive interest rate, you have the option of waiting for your tax refund and deferring your first payment by 120 days to repay your RRSP loan.
Obviously, your situation is unique. A financial security advisor will be able to guide you regarding what actions to take based on your personal and financial situation. Don’t have one? Find an advisor near you today.