Comments on: RRSP Loans; A Great Investing Strategy or An Evil Product Manufactured by Banks?

By: Carrying Forward Your RRSP Contribution, Renter's Market, and RSSP Loans

Carrying Forward Your RRSP Contribution, Renter's Market, and RSSP Loans — Mon, 17 May 2010 18:08:58 +0000

[...] The Financial Blogger states the pros and cons of RRSP loans. [...]

By: Ray

Ray — Fri, 20 Feb 2009 19:38:08 +0000

I have not used the strategy yet myself, but as long as you are responsible and like you mentioned use the tax refund for financial planning (paying of part of the loan), i think it is a great option. But unfortunately many who do use it are not fully committed or disciplined.

By: CanadianFinance

CanadianFinance — Thu, 19 Feb 2009 16:25:23 +0000

I use an RRSP credit line equal to the tax refund I expect.

For example, if you contributed $5000 throughout the year and was at a 32% marginal tax rate, you could expect a $1600 refund. You could then borrow about $2100 and pay it back with the tax refund.

This can give you an extra year of tax-free growth, force you to invest your tax refund, and even improve your credit rating.

By: The Financial Blogger

The Financial Blogger — Wed, 18 Feb 2009 16:24:30 +0000

IS,
thx for the new design

The best way is still to contribute on a systematic basis. However, sometimes it doesn’t hurt to force yourself to become more disciplined

Traciatim,
you are already getting 12% out of 18% of your maximum rrsp contribution so you are on the right track. keep it up!

By: Traciatim

Traciatim — Wed, 18 Feb 2009 16:11:47 +0000

In my situation, kind of IS. The only other RRSP contributions I make are through my paycheck at work since they match 6% of salary, so 12% of my income gets put away for the future. I doubt that I would make any changes to that.

I suppose it may be better simply to set up a pre-authed payment plan rather than a loan payment, at least that can be canceled in the future if things go awry over the year, you do have a good point there. I’m not sure I’m going to pull the trigger on this one this year, but it is pretty tempting. Knowing the way I act in most other decisions like this i will probably just do nothing until it’s too late, making the decision not to do it for myself through inaction

By: IS

IS — Wed, 18 Feb 2009 15:07:14 +0000

Love the new design TFB by the way, very clean cut!!

Wouldn’t be just better to simply gain some discipline and invest weekly into the RRSP instead of contracting a loan which you might end up doing every year if you start (because it will take away cash flows and thus make it more difficult to contribute weekly?

By: The Financial Blogger

The Financial Blogger — Wed, 18 Feb 2009 13:47:55 +0000

Over such a short period of time and the bonus, I personnaly think it’s a no brainer ;-0

on top of that, you will probably receive a $300 tax return so you only have to find $700 for the upcoming year

By: Traciatim

Traciatim — Wed, 18 Feb 2009 12:57:47 +0000

I was almost considering trying out a loan this year since being solicited by ING Direct. They are offering a $25 bonus if you buy $1000 in their street wise fund. They are offering the loans at 4% currently, if I’m remembering correctly. If I simply take the $1000 bucks over a year at 4% and buy the fund the $25 bonus will pay off most of the interest, I get a tax deduction that helps my CCTB next year and gives me a little extra cash back when i do my taxes.

I couldn’t really find the down side to a loan this small that costs near nothing . . . Only a few days to decide