How an RRSP Loan Can Help You Save $ NOW and LATER

How an RRSP Loan Can Help You Save $ NOW and LATER

The value of an RRSP Loan is that is allows you to take advantage of an RRSP's tax benefits even if you don't have the full contribution amount. In other words, you can save money NOW by deferring taxes and then save money LATER when you pay less tax on your funds when they're withdrawn.

So don't worry if your cash flow doesn’t allow for a robust contribution. If you borrow your contribution amount, you won't have to lose out on this tax opportunity. 

With an RRSP Loan, you can:

  • Defer a tax amount greater than the interest charged.
  • Save for retirement.
  • Grow your contributions over time.

For many people, monthly loan payments over the course of a year are more manageable than a large lump sum payment. Here’s an example of the cost of a $1,000 RRSP loan at 2.7% interest in comparison to what you can earn: (Assumes a 40% income tax rate.)

  • $1,000 x 2.7% = $14.68 in interest. (Total loan amount plus cost to borrow: $1,014.68. Bear in mind, with monthly loan payments, the principal amount is reduced every month meaning the interest charged every month reduces, too.)
  • 12 monthly loan payments: $84.56
  • Amount of tax you’ll defer for the year: $400
  • Your cost of deferring tax on a $1,000 RRSP contribution for the year: only $14.68!
  • Plus, your contribution will have time to grow over the years

The chart below displays more examples of the advantages of an RRSP loan at DUCA's competitive loan rates. After you review the chart, feel free to contact your branch or Member Connect at 1-866-900-3822 to discuss your RRSP Loan.