Hey
One of the things I love most about money, is that it can do different things at the sane time: "Kill Two Birds With One Stone" as the expression goes... Said another way, 'Achieve multiple goals, with one action'.
So here’s a strategy that might surprise you: RRSP loans.
*BIG FAN*
Done right, they can lower your taxes, boost your investments, and even help you leverage debt wisely to build wealth faster.
How to Use RRSP Loans to Your Advantage — Not Just for Tax Time
Let me break it down with a simple example:
💰 Let’s say you:
- Earn $80,000/year Not a requirement. Just an example.
- Haven’t contributed much to your RRSP this year (or ever!)
- Take a $10,000 RRSP loan in February or any time before the contribution deadline.
✅ What happens:
- You contribute that $10,000 to your RRSP
- That contribution now lowers your taxable income to $70,000
- This puts you into a lower tax bracket (KEY!) and can generate a refund of around $2,000–$3,000, depending on your province. (That's cash back in your pocket!)
💡 Many people use that tax refund to immediately pay down a chunk of the loan — which is a smart move.
📈 Now here’s the kicker:
- Your $10,000 investment is now growing inside your RRSP tax-deferred
- Over 20 years at 6% average annual return, that $10K could grow to $32,071
- And there are investments which I have access that are more like 10-14% ROI / yr.
🧠 Meanwhile:
- The RRSP loan may cost you 6–8% in interest annually.
- And the interest that you pay for that loan, to invest, is a tax write off.
** NINJA **
- But if you repay it over 1–2 years, total interest may be only $600–$1,000
✅ When RRSP Loans Make Sense:
- You have available and unused RRSP contribution room (many people do - its dependent upon your income and everyone gets a percentage each year. To find out your amount, consult your accountant or look at your last tax return. It'll be there.)
- You're in a high tax bracket or you make good income. ie: over $70,000 a year.
- You can comfortably repay the loan within 12–24 months
- You're committed to using the refund strategically (not blowing it!)
👎 When They Don’t:
- You’re carrying high-interest consumer debt.
- You have little to no available cash flow.
- Your income is too low to benefit from a large tax deduction.
- You’re not ready to commit to repaying the loan responsibly.
RRSP loans aren’t for everyone. But for the right person? At the right moment?
They can be a powerful wealth-building tool. Using the right debt for leverage and growth makes perfect sense when you run the numbers. Always run the numbers.
Want help figuring out whether this strategy is right for you?
👉 Book a free 15-minute call with me here.
Let’s walk through your numbers together and create a smart RRSP plan that reduces taxes and sets you up for future financial wins and growth to achieve your goals.
To your success,
Michael Santonato
0 comments