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What's smarter: invest in your RRSP or pay down your mortgage?

It is a personal question and do not have a standard answer because the answer to this question is depending on many factors such as interest rate, persona tax blanket, RRSP contribution room, personal risk tolerance, personal ability to borrow and so on. In this wall, we will see how this factors affect personal choice and will recommend how to use calculator to support your decision.

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Summary
Before making decision to the question, we have to understand what is RRSP, what is the difference between investing in RRSP and non RRSP, what is the room limit and withdraw rule of RRSP, all this will help you understand how RRSP will impact your financial planning.

Why I choose this Video
I choose this Video because it's way of presentation is interest and easy to understand, and this video provides everything you need to know about RRSP. Understand how RRSP is functioned will support your decision of money allocation.

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Website #1 Registered Retirement Savings Plan

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Website #1 Registered Retirement Savings Plan

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Summary

This video is about common Q&A about RRSP plan. RRSP has a well-known concept to people that you can defer your payable tax by contribution to RRSP. But there are many detail while in practice,  Q&A will give your answers to the frequent asked questions like withdraw rules.

Why I choose this website
I feel this website recourse is as useful to supplement the video of RRSP and act as a platform and handy book that you can print or save link for quick check points to support your decision.

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How does an RRSP work?

Any contributions into your RRSP can help you decrease your current taxable income. This means you won't have to pay taxes on your contributions or any investment growth until you withdraw funds.

For most Canadians, withdrawing from your RRSP at a later point in life - in your 60s or 70s - means paying much less tax.

Think of it this way: you'll probably be in a much lower tax bracket when you're retired in your 60s or 70s. So, you'll be paying less tax when you withdraw from your RRSP at that age, all the while helping to lower your current tax bill.

Plus, you can hold a variety of investments in your RRSP, like:

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RRSP: Registered Retirement Savings Plan

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What is an RRSP? A registered retirement savings plan is a savings account with special tax perks. It's a great way to grow your money for the future. Talk to a Sun Life advisor about how an RRSP can help you meet your retirement goals and needs.

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Video #2 How does an RRSP contribution reduce your income tax?

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Video #2 How does an RRSP contribution reduce your income tax?

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Summary

This video is focus on how to lower your tax blanket and get a refund at tax time by making contribution towards RRSP.

Why I choose this Video
This video is main focusing on the very important benefit that contribution into RRSP will help you to save tax and generate cash flow. However, it is also important to understand that this strategy not applicable to every individual as people's different income falling into diffident tax blanket. This video give you simple examples to compare how RRSP work for you or not under different salary range.

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How does an RRSP contribution reduce your income tax?

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What did you learn about the topic that most surprised you?

This topic was interesting because as people accumulate more wealth, it is very important decision of how to make you money works more efficient to you. Under vary economic circumstance, investing, reducing debt or borrowing are all importance part of financial planning. There is no standard answer, all aspects have to be taken into consideration. I am inspired by the idea of borrowing to invest, the opportunity cost of investing against mortgage payment is comparative low, especially under high inflation economic circumstances.

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

This topic is relevant to me because it is the topic I am thinking about under current RRSP season. I have a mortgage and also RRSP account, after considering interest rate, tax blanket, inflation, risk tolerance, cash flow and finance ability, I decided to contribute into RRSP instead of payoff mortgage. My mortgage interest rate is 1.6%, current inflation rate is 5%, it is obvious that contribution of RRSP will benefit me most.

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

I would share with my family that use all resource on the wall to support your decision. Financial planning is very personal, other's choose may not apply to you. Equipping yourself with finance knowledge, seeking advise from professional are important to help you make a reasonable decision. No one knows you better than yourself about your financial goals, rick tolerance, relationship with bank, job prosperity and so on. If you want to be benefit from financial planning, you have to be more knowledge about finance.

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This graphic expresses that people want to be debt free on the home as soon as possible. Reasons are very different and personal, but one of the main reason is that home offers a unique sense of security for people and a debt free home is the foundation of security.

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This graphic expresses the time length to pay off mortgage before retirement. It is critical that the less time remains before retirement, the more urgent people wants to pay off their mortgage, instead of investing in RRSP.

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Summary
This video help you to understand an very important factor  how interest affect mortgage payment, which will have a direct impact on your cask flow planning. Shopping for mortgage and having knowledge about interest rate trend is vital to mortgage decision.

Why choose this video
Mortgage payment is the most part that most people really care. Interest rate is the critical factor affects your payment. When you make decision between mortgage and RRSP investing, interest is one of the factor that has to be considered not under current moment but also the trend. Understanding interest will help you have better decision on payoff mortgage or RRSP investment.

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Mortgage Interest Rates | Housing | Finance & Capital Markets | Khan Academy

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Summary
This video offers you knowledge about another way to finance your investment, borrow to invest.

Why choose this video
I would like offer this video as a new aspect to this topic of investing in RRSP or mortgage payoff. Some people hate borrowing, some people like. During the RRSP season, many banks will offer RRSP loan to clients in order to satisfy the needs of RRSP contribution. Those people who choose RRSP investment instead of payoff mortgage can be deemed as borrowing for investment by paying the cost equal to mortgage interest rate. As mortgage interest rate are one of the lowest rate in the market, that means your cost of borrowing will be relative low compared to other ways of borrowing, which will lead to a high net return.

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Should You BORROW to INVEST? | How Investment Loan Works? (Leverage Loan)

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Website #3 Creating a Tax-Deductible Canadian Mortgage

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Website #3 Creating a Tax-Deductible Canadian Mortgage

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Summary
This website is another aspect to help you think about the topic of investing or payoff debt. This article will tell you about mortgage on investment property and how to be tax efficient by borrowing to invest.

Why choose this website
There are many Canadian having more than one property which means mortgage is not just on primary residence but to the extent that many investor use mortgage to invest in real estate. When consider investment strategy, it is important to understand how mortgage can help you save tax by interest deduction, which will make your investment more efficient.

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Creating a Tax-Deductible Canadian Mortgage

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Mortgage interest is not deductible in Canada, but this strategy could allow you to get the financial benefit anyway.

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Website #2 Investment Risk Tolerance Test 

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Website #2 Investment Risk Tolerance Test 

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Summary
This website is a tool to help you asses your level of risk tolerance as risk tolerance are personal feeling on sense of security, it is one of the critical aspect that influence investing decision.

Why I choose this website
There are many objective aspect that can be explained or calculated to the decision that whether you choose payoff mortgage or investing in RRSP. However, risk tolerance is the invisible but very important part to affect the decision. This website will help you understand yourself regarding risk and thus support your decision.

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BCSC InvestRight | Investor Education for British Columbians

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Before you can decide on a personal investment strategy, you need to consider how much or how little risk you are prepared to take with your money.

Suitability

Your risk profile fits into the overall issue of suitability. Every registered investment advisor in Canada is required by law to recommend only investments that are appropriate for an investor's goals and financial situation. Investment advisors must also create a "risk profile" for an investor, which combines their level of risk tolerance as well as their ability to withstand losses. Go to the Know Your Advisor section to find out more about working with a registered investment advisor .

Factors that Affect Your Risk Profile

Time Horizons - The amount of time you have to meet your financial goals and to make up for any losses you might experience. People with long time horizons may be more willing to accept more risk than those who are saving to meet a short-term financial goal.

Cash Requirements - The extent to which you depend on your investments to meet day-to-day expenses. Investors who rely on their investments to meet daily living expenses will be much less comfortable with the risk of losses.

Emotional Factors - Your emotional response to changes in the value of your investments. Some people are quite comfortable with the ups and downs of the market, while others lose sleep when their investments fluctuate in value.

Risk Test

Take our Risk Test to help determine how much risk you feel comfortable with.

How much risk do you feel comfortable with? How much risk can you afford to take? Your appetite for risk will depend on your personal goals, life stage, lifestyle, timeline, and knowledge. Take this test to discover more about your personal risk tolerance, a key criteria in all investment decision-making.

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Investment Risk Tolerance Test | BCSC InvestRight

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Before you can decide on a personal investment strategy, you need to consider how much or how little risk you are prepared to take with your money. Your risk profile fits into the overall issue of suitability. Every registered investment advisor in Canada is required by law to recommend only investments that are appropriate for an investor's goals and financial situation.

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Summary
This website is a calculator to help your decision of RRSP VS. Mortgage contribution. By entering your own tax blanket, mortgage payment, interest rate, you may able to get a quick answer to support your decision.

Why choose this website
This website is a great way to give you a direct sense to support your decision of where money should go. It is objective and not subject to other emotional factor, its result is based on comparison of invest return and borrowing cost, which is simple for understanding, especially for those without much knowledge of finance and investment.

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The power of RRSPs

The best strategy for you

Get RRSP advice

Learn more about how you can take advantage of the benefits of RRSPs to save for your retirement.

Registered retirement savings plan (RRSP)

Other helpful RRSP calculators to try:

RRSP calculator

RRSP loan calculator

Make an RRSP a key part of your retirement plan. Talk to your advisor about building an RRSP that fits your needs.

Speak with an advisor today

The power of RRSPs

Learn more about how you can take advantage of the benefits of RRSPs to save for your retirement.

Registered retirement savings plan (RRSP)

The best strategy for you

Other helpful RRSP calculators to consider:

RRSP calculator

RRSP loan calculator

Get RRSP advice

Make a RRSP a key part of your retirement plan. Talk to your advisor about building an RRSP that fits your needs.

Speak with an advisor today

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The power of RRSPs The best strategy for you Get RRSP advice Learn more about how you can take advantage of the benefits of RRSPs to save for your retirement. Registered retirement savings plan (RRSP) Other helpful RRSP calculators to try: RRSP calculator RRSP loan calculator Make an RRSP a key part of your retirement plan.