Are you looking for an intelligent way to reduce your mortgage balance and save for your retirement in Canada? In that case, buying a Registered Retirement Savings Plan (RRSP) and applying the tax refund against your mortgage balance might be a good option for you. In this blog, we’ll discuss the benefits of this strategy and why it could be a wise financial move.
Lower your taxable income.
The first benefit of buying an RRSP is that it can lower your taxable income. This is because your contributions to your RRSP are tax-deductible, which means they reduce the income tax you must pay. For example, if you make $60,000 a year and contribute $5,000 to your RRSP, your taxable income will be reduced to $55,000. As a result, you’ll pay less in income tax, leaving you with more money to put toward your mortgage.
Build your retirement savings.
The second benefit of buying an RRSP is that it allows you to build your retirement savings. The more you contribute to your RRSP, the more you’ll have available in retirement. Your contributions to your RRSP are invested and grow tax-free until you withdraw the money in retirement. This can help you build a sizable nest egg for your retirement, providing you with financial security and peace of mind.
Use your tax refund to pay down your mortgage.
The third benefit of this strategy is that you can use your tax refund to pay down your mortgage balance. When you contribute to your RRSP, you’ll receive a tax refund from the government. This refund can be applied directly to your mortgage balance, which can help you pay off your mortgage faster.
Save on interest costs.
The fourth benefit of this strategy is that you can save on interest costs. By applying your tax refund to your mortgage balance, you’ll reduce the principal amount of your mortgage. This, in turn, can reduce the interest you’ll pay over the life of your mortgage. Even small amounts can make a big difference in the long run.
In conclusion, buying an RRSP and applying the tax refund against your mortgage balance can provide you with several financial benefits in Canada. It can help you lower your taxable income, build your retirement savings, pay down your mortgage faster, save on interest costs, and provide flexibility in your financial planning. Consult with a financial advisor to determine whether this strategy suits your financial situation.