Mortgage First RRSP Later

canadian money housing rrspJudging by the barrage of Registered Retirement Savings Plan (RRSP) information you would think making a contribution before the March 3rd deadline is a slam dunk no matter who you are.

The truth is; it doesn’t make sense for a lot of people – especially if you’re young.

In most cases it’s better to pay down debt than contribute to a registered retirement savings plan. In some cases paying down your mortgage is money better spent.

I don’t just say this. I lived it. My story goes back more than 20 years. Sure, mortgage amounts are higher now and mortgage rates are lower, but the formula still makes sense.  Read More…

This article has 6 Comments

  1. Isaiah Piper

    I never understood why people have the obsession of buying a home and not renting. Most people don't stay in their homes for more than 5 years so it makes more sense to rent.

  2. Alberto

    @Roger, the article did indeed say that he and his wife were low income earners when they bought their first house but later they entered a higher bracket. So what he is suggesting is the proper way (he delayed using his rrsp contributions until later).

    So one should plan ahead and understand if they will be earning more income in the future and if so then delay contributing until such time.

  3. Roger

    Not sure i agree with this article. Your goal is to pay reduce your tax obligation when your income is high through contributions to your RRSP. By not doing so but delaying it and paying off your mortgage you get dinged early.

    This of course assumes they were in higher tax brackets to begin with which is a common case for home buyers, like me.

  4. Ronald

    I looked to a HELOC and took advantage of the 1-time RRSP withdrawal by CRA. It worked out great and we are on the verge of repaying it back. I love the feature when i first heard about it a few years ago.

  5. Gunnar S

    So whats the difference between RRSP's and TFSA's. I was trying to read about them on cra's website but it sounds very similar.

  6. Dominic Welshhous

    What i can't understand is why there are so little options for contributions that are worth it. Most banks only give 1.5% which is pretty lousy. Any better options?

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