When faced with the tough choice between contributing to an RRSP and paying off their debts including mortgages, most Canadians make the wrong choice depending who your financial advisor is. Most people will advice you based on the ‘start early’ notion of retirement contribution plan. However, according to one Vancouver mortgage agent, when you do the math and think about the risks involved in the stock market investment, you may concur with me that the best choice would be to forget RRSPs until your entire mortgage loans are settled. The ‘start late’ notion may not only be appropriate but is well the truth.
Assuming non-existence of the Stock Market
According to the same Vancouver mortgage brokerage, A strong case can be argued out to completely overlook the stock market as a whole when making retirement savings. The risk in the stock market adversity is just too big, even if a great Vancouver mortgage rate applies. This is particularly true if you were to start saving late, there is just little or no time at all to recover from a crash in the stock market. But can you ignore the stock market? The answer is yes, just pretend it isn’t there; ignore it. With this, 100 percent of your investments now go into the fully government-guaranteed, non risky, fixed-income GICs.
The RRSP Misleading Notion
During our spending days, when we are also in debt, we are being encouraged to invest in our RRSPs. In fact, they advice us to start paying RRSPs as early as you can. This is to enable us take full advantage and realize the benefits of ‘compounding’. The truth is that this clever word game may just leave the pushers rich and you poorer
Since we are in debt, RRSP contribution will only be possible through borrowing. If for example you pay $1000 for your RRSP, reality is that you are borrowing $1000 at the highest interest rate available since this could have helped reduce your highest interest mortgage. You are simply compounding your debt against you and to the benefit of the loan provider. This is especially true if your top mortgage rates vancouver are lower.
Highly Taxed RRSP
One major advantage of late RRSP contribution is taxes. Since by then you will be earning more and out of debt, you can make larger RRSP contributions at the highest tax bracket you can because will possibly be earning more then. This will amount to much more tax refund which can help pay your RRSP contribution. Also dont forget that you can purchase a home with the rrsp funds from your Canadian contribution.
So, instead of struggling to gain from compounding that usually require s that you save for ages, why not just use the benefit of tax-returns to get to where you’d want to be with little or no risk at all? You can start seeing how beneficial it is to pay off your mortgage in vancouver faster, especially if you have a great vancouver mortgage agent