Retirement Savings Plans
RRSP Line of Credit
An RRSP line of credit allows you to contribute to your RRSP—and therefore to increase your contributions—despite a temporary cash shortage.
In addition, by using your tax refund to pay off part of your line of credit, you increase your RRSP contributions while keeping the same monthly payments.
Features and Advantages
- You maximize your retirement savings immediately.
- You receive a higher tax refund.
- You benefit from your unused contributions.
- You reach your savings objectives more quickly.
- You increase your retirement income.
How an RRSP Line of Credit Maximizes Your Retirement Capital
The example below illustrates how you can double your RRSP contribution and keep the same monthly payments. All you need to do is use your tax refund to pay off part of your RRSP line of credit.
| Tax Refund Not Used Particulars | Tax Refund Used to Pay Off Line of Credit Particulars | |
|---|---|---|
| Loan/RRSP contribution | $3,000 | $5,750 |
| Interest rate on loan | 6%1 | 4.5%2 |
| Monthly payments | $258 | $258 |
| Tax savings | $1,4403 | $2,7603 |
| Long-Term Accumulated Value | ||
| Value after 15 years4 | $8,277 | $15,864 |
| Value after 20 years44 | $11,609 | $22,251 |
1Current rate applicable on a loan of less than $5,000. Amortization period of 12 months.
2Current rate applicable (without the reduction of ½ of 1%) on a loan of $5,000 or more. Amortization period of 12 months.
3On the basis of a marginal tax rate of 48% that can vary according to your financial situation.
4On the basis of an annualized return of 7%.
*The interest rate is subject to change without notice.
