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1. What did you learn about your topic that surprised you the most?

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1. What did you learn about your topic that surprised you the most?

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Going into this topic I already knew next to nothing about RRSPs, so it was really interesting to me to learn that there is a maximum amount you can invest into it per year.

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2. Provide a real-life example of how this topic is relevant or interesting for you.

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2. Provide a real-life example of how this topic is relevant or interesting for you.

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Coming into my early 20's it wont be long until I am searching for a house myself. It is also around the time I need to start paying into insurances and RRSPs, so learning about this topic has been a great help in getting the right information and sources.
As of right now I have begun to look into both life insurance and RRSPs, this felt like a good first step in getting the right financial institution and plan.

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3. If you could pass on your knowledge to a family member or a friend, what do you think is the most important thing to pass on?

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3. If you could pass on your knowledge to a family member or a friend, what do you think is the most important thing to pass on?

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The most important thing I would pass on is to start young. Start investing in your late teens and get a solid foundation under yourself. The earlier you invest the more that builds in an RRSP.

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An RRSP is a Registered Retirement Savings Plan. This video explains that an RRSP essentially allows you to put in cash, mutual funds, and stocks and they are able to grow tax-free until you are ready to retire and withdraw them.
The video goes on to emphasize the importance of getting an RRSP, first due to the lower taxable income and it provides lower tax on withdrawals later on.
The video also explains that in order to open an RRSP you must be under 71 years old and file income tax as a Canadian resident, and can be done at almost any credit union.

I chose to include this video because it lays down the basics on what an RRSP actually is and the benefits of having one.

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A mortgage is a loan from a bank/financial institution that, with putting in a down payment, allows someone to purchase a house. With a mortgage comes interest rates and breaks down the house expense into affordable monthly payments.
This video goes on to explain the difference between a fixed rate mortgage and a variable rate mortgage.
A fixed rate mortgage gives a fixed monthly payment, while a variable rate mortgage means your payments will fluctuate each year as the prime rate fluctuates.

I chose this video because I found it is an excellent introduction for mortgages and how to apply for them. It also uses simple visuals and key words that emphasize important topics such as how to apply, what a term is, and what both mortgage types are.

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This video builds on what video 1 already taught us about RRSP, stating it is a giant tax deferral tool. The speaker then goes into detail to explain when an RRSP is attractive and when it should be avoided using three scenarios.
Scenario one states that the tax rate is the same now to when you retire, and you withdrawal a couple hundred dollars more than what you first invested.
Scenario two states that the tax rate is higher now and lower when you retire, and you withdrawal a higher amount than even scenario one.
Scenario three states that you are a very low income Canadian now and when you retire. This low income makes you qualified for the Guaranteed Income Supplement (GIS). If you have this, the speaker recommends not investing in an RRSP because you are left with a fraction of what you initially invested.

I wanted to include this video because the speaker addresses three very real scenarios and gives a better understanding of how an RRSP can change depending on your situation both in present and future life.

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During this video, Lauren Haw explains what the RRSP Home Buyers's Plan is and how it can effect you and how you purchase your first home.
This plan, if you are eligible, can allow you to withdrawal up to $25,000 from your RRSP fund to put towards a down payment for a mortgage.
You must meet a few requirements; you can't have owned a home in the past 4 years, you must sign an agreement to buy the home and move in within a year, no outstanding balance if you've used the Home Buyer's Plan before, money must be in the RRSP for a minimum of 90 days previously and you must make the withdrawal within 30 days of owning the home.
Lauren Haw goes into using math scenario's to then explain how the RRSP payment plan works within a 15 year payment plan.

I wanted to include this video because I wanted to show that an RRSP and a mortgage can be used together to purchase a home. An RRSP can be used to put a down payment towards a home, but then needs to be paid off separately from the mortgage.

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The RRSP Home Buyers' Plan - Mortgage Math #3 with Ratehub.ca

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This website explains what an RRSP is and how it works in terms of investing, earning, and withdrawing.
It explains that you can invest up to 18% of your previous years earned income or the maximum contribution for the current year which is $26.500.
Multiple investments can be put into an RRSP including; gold. cash. savings bonds, mutual funds, GICs, etc.
RRSPs must be closed in the year of your 71st birthday, and can be withdrawn in cash, covered to a RRIS or bought into an annuity.

I chose to include this website because it goes more into detail of what you can actually invest into an RRSp and what medium it can be in.

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3 tax advantages

1. Tax Tax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs. + read full definition -deductible contributions - You get immediate tax relief by deducting your contributions from your income each year. Effectively, your contributions are made with pre-tax dollars.

2. Tax-sheltered earnings Earnings For companies, it's the money they make and share with their shareholders. For investors, it's the money they make from their investments. + read full definition - The money you make on your RRSP investments is not taxed as long as it stays in the plan.

3. Tax deferral - You'll pay tax on your RRSP savings when you withdraw them from the plan. That includes both your investment earnings and your contributions. But you have deferred this tax liability to the future when it's possible that your marginal tax rate will be lower in retirement than it was during your contributing years.

How much you can contribute

Anyone who files an income tax return and has earned income can open and contribute to an RRSP. There are limits on how much you can contribute to an RRSP each year. You can contribute the lower of:

18% of your earned income in the previous year, or

the maximum contribution amount for the current tax year: $26,500 for 2019.

If you are a member of a pension plan, your pension adjustment will reduce the amount you can contribute to your RRSP.

You can carry forward unused contributions

If you don't have the money to contribute in a year, you can carry forward your RRSP contribution room and use it in the future. Learn more about how RRSPs work.

Investments you can hold in an RRSP

Investments that can be held in an RRSP are called qualified investments. They include:

Investments you can't hold in an RRSP

Precious metals

Personal property such as art, antiques and gems

Commodity futures contracts

As of March 22, 2011, you also can't hold any of the following investments in your RRSP:

If you buy these investments for your RRSP, you will be charged a tax equal to 50% of their fair market value Market value The value of an investment on the statement date. The market value tells you what your investment is worth as at a certain date. Example: If you had 100 units and the price was $2 on the statement date, their market value would be $200. investment Investment An item of value you buy to get income or to grow in value. + read full definition . You may apply for a refund if you dispose of the + read full definition from your RRSP by the end of the year after the year the tax applied. Learn more about these rules.

Understand the risks

The value of your RRSP may go down as well as up, depending on the investments it holds. Learn more about investment risks.

How long your RRSP can stay open

You must close your RRSP in the year you turn 71. You can withdraw your RRSP savings in cash, convert your RRSP to a RRIF or buy an annuity.

Where to open an RRSP account

Credit unions and caisses populaires

Investment firms (for self-directed RRSPs)

RRSP or ?

Both offer tax advantages. Learn how they differ by reading Comparing TFSAs and RRSPs.

Take action

Use this RRSP calculator to figure out how much you need to save for retirement.

2 key points

1. You can open an RRSP at any age as long as you have earned income and file a tax return.

2. You must close your RRSP when you turn 71.

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How RRSPs work | RRSPs | GetSmarterAboutMoney.ca

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A Registered Retirement Savings Plan (RRSP) is an account, registered with the federal government, that you use to save for retirement. Anyone who files an income tax return and has earned income can open and contribute to an RRSP, and RRSPs have special tax advantages.

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Website 2 - Down Pay Your Mortgage or Invest in RRSP?

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Website 2 - Down Pay Your Mortgage or Invest in RRSP?

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This website compares whether it is more important to pay off your mortgage or contributing to your RRSP.
The main point is to balance between paying the morgage and putting money into your RRSP. because your RRSP produces compound interest and can be used as an emergency fund.
It then lays out tips on paying your mortgage more quickly, listing to make payments weekly instead of monthly, select a shorter payment term, and using your RRSP contribution to pay your mortgage.

I chose to include this website because while there is a large debate on whether to go for an RRSP or a mortgage, it is possible to have both at once. As stated in video 4 as well, you can also use one to pay the other off.

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In a perfect world, paying off your mortgage before contributing to your RRSP would be a good thing to do. But that would call for extreme discipline.

After your last mortgage payment, you would have to keep putting the same monthly amount aside for your retirement. That's not very realistic.

Another possibility is to make substantial contributions to your RRSP before buying a home. However, a home is more than a financial investment; it's a life choice that you don't want to put off for too long. The RRSP that you started early could help make you a homeowner more quickly through the Home Buyers' Plan. Find out how to withdraw from your RRSP without penalty to buy a property.

That's why it's usually best to find a balance between paying your mortgage and contributing to your RRSP, even when RRSP returns are lower than mortgage interest rates.

Why? Because the capital invested in your RRSP will produce compound interest in a tax shelter. In the long run, you'll have a substantial nest egg for your retirement. Furthermore, for those who have nothing to fall back on in the event of illness or unemployment, an RRSP can be used as an emergency fund.

Whether to pay down your mortgage and contribute to an RRSP also depends on your age. If you're not retiring for a while, the compound interest in a tax shelter of the RRSP is more advantageous than a paid off mortgage. If your retirement is around the corner, pay your mortgage more quickly to reduce your budget for the next few years.

Also to be considered, if you are taxed at a high rate, RRSP contributions might be more advantageous than mortgage payments because of the associated tax savings.

To pay off your mortgage more quickly, follow these tips:

Make your payments weekly instead of monthly.

If possible, select a short term. The interest rate is usually lower than for long terms.

Opt for the variable rate, the lowest on the market, and by making higher payments, you'll pay off your mortgage more quickly.

Each year, use the tax return you get from your RRSP contribution to pay down your mortgage.

If you want to contribute to your RRSP but can't seem to pay off all your credit cards, you need to review your financial plan. Start by listing your priorities.

Tools and tips

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Should you pay down your mortgage or contribute to your RRSP? | Desjardins

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In a perfect world, paying off your mortgage before contributing to your RRSP would be a good thing to do. But that would call for extreme discipline. After your last mortgage payment, you would have to keep putting the same monthly amount aside for your retirement. That's not very realistic.

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This website helps you find better products and rates for your specialized needs.
It has a search engine that allows you to see competitive mortgage rates and even has an option for renewing or refinancing your mortgage.

I chose to include this website because if anyone is beginning to look into purchasing their own home, this would be a really good tool for finding the best mortgage rate that works for you.

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Compare Canadian Mortgage Rates | Find the Best in Canada | Ratehub.ca

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Compare Canada's best mortgage rates and save-we source rates from banks and mortgage brokers each day so you can find the best current mortgage rates.

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This website is from the Bank of Montreal and outlines what an RRSP is from their financial institution.
The web-page outlines the three main benefits of an RRSP; seeing returns faster, mixing things up, and saving on taxes. It also shows the main numbers included from website 1; the age of closing, maximum contribution limit and the percentage amount that can bee invested each year.

I included this website because the first step to learning about RRSPs is calling around and finding which financial institution works best for you.

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Registered Retirement Savings Plan (RRSP) | BMO

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Invest for tomorrow while saving on taxes today. Find out how an RRSP can help you reach your retirement goals.

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The below image shows real estate costs across Canada from Jan 2017 to Sep 2019. I found it quite shocking that the price of homes is so high in Vancouver and Toronto compared to the rest of Canada. There is a very large $400,000 gap between the cities.

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I included the picture below because when you think about an RRSP, the earlier you begin to invest in them the better. It only takes a small amount of funds over the decades of investing to create a large sum of money to retire with.

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Here you will learn about what goes into investing in RRSPs and mortgages, and the differences and similarities between the two.

You can look into when to avoid an RRSP, and how to use an RRSP to pay off a mortgage as well.