Invest in RRSP VS MORTGAGE by Saksham Rajput

What is RRSP?

sakshamrajput7814 — 2023-12-05 12:04:38 UTC

This video explains that RRSP is Registered retirement savings plan. It explains how RRSP is an Investment account just like TFSA, cash account. They talk about the advantages of having a RRSP; it is a Tax sheltered plan, where-in the money you make within the RRSP is not taxed.

That includes any income, like capital gains, dividend from stocks, Interest rates from Bonds and many other. The video also provides an example explaining the RRSP.

The video explains how it also works as Tax-Deferral Plan, which means that the amount of money you contribute to the RRSP, that amount can be deducted from your taxable income.

The reason why I picked this video is the direct one-on-one type of information flow it has. The creator has clearly mentioned everything a beginner should know about RRSP.

What is a Mortgage?

sakshamrajput7814 — 2023-12-05 12:37:31 UTC

This video explains about Mortgages. They explain how a mortgage is basically a percentage of the value of the property you borrow plus the interest rate. It explains the 2 type of mortgages. Starting with Repayment Mortgage, where-in whatever amount you pay, goes to the capital and the rest goes to the interest rate. The second type is Interest-only mortgage; it generally has lower monthly payments because you are not paying off the loan but the interest rate only. It is the clients decision as to how they want to pay the rest of the capital at the end of the term.

The reason why I picked this video is because it not only explains what a mortgage is but it also talks about 2 different type of mortgages giving viewers an idea on different types of mortgages.

RRSP or Mortgage?

sakshamrajput7814 — 2023-12-05 13:06:46 UTC

In this video, the creator explains how RRSP's are deferred taxes and not tax credit whereas with mortgages the interest rates are higher affecting yield. He explains how no RRSP can guarantee a better and higher return. He suggests that whenever you have extra funds, you should always pay off your mortgage.

The reason why I picked this video is because explains how mortgages are better than RRSPs and he also explain how it is better to pay off your mortgage than investing in an RRSP

Why choose Mortgage over RRSPs?

sakshamrajput7814 — 2023-12-05 13:20:26 UTC

In the above video, they explain what a RRSP is and what a mortgage is. Further in the video, with the help of 3 Quick Rules on Thumb it is explains why paying off your mortgage is better than a RRSP. It includes:

If the interest rate on your mortgage is higher than the returns on your RRSP, it is better to prioritize paying down the mortgage
If having debt makes you uncomfortable, consider paying off your mortgage.
If you do not have secure retirement plan, such as a pension scheme, consider contributing to your RRSP.

It also suggests a way to pay off your mortgage using the income tax refund from your RRSP.

The reason why I choose this video is because it gives a clear idea as to how you can make a decision on what is better; contributing to RRSP or mortgage.

Website #1

sakshamrajput7814 — 2023-12-05 13:36:45 UTC

The above article explains what an RRSP is and how it works. A Registered Retirement Savings Plan (RRSP) is a specialized savings account designed for retirement in Canada. It provides tax advantages to individuals, their spouses, or common-law partners who contribute to it. When you make deductible contributions to the RRSP, it lowers your taxable income, offering a potential tax benefit. Within the RRSP, any income earned on your investments is not taxed until you decide to withdraw the funds. At the time of withdrawal, regular income taxes are typically applied. In essence, the RRSP encourages individuals to save for retirement by providing tax incentives for contributions and deferring taxes on investment earnings until retirement.

The reason why I chose this website is because it is Canada's official website. Hence there is barely any chance that there is misinformation or false claims.

Website #2

sakshamrajput7814 — 2023-12-05 13:51:39 UTC

Contributing to an RRSP in 2022-2023 is crucial for retirement savings. Canadians, are now actively preparing for retirement, with 47% knowing how much they need to save. RRSP contributions also offer a chance to reduce taxable income by deducting the contribution amount. Maximizing the RRSP contribution limit for 2022 (up to $29,210) and 2023 ($30,780) enhances potential tax deferral benefits. Starting early takes advantage of compound growth within the RRSP, while a Spousal RRSP can be strategically used for tax efficiency in cases of income disparity between partners. In summary, RRSP contributions serve as a comprehensive strategy for retirement planning, tax reduction, and maximizing financial benefits.

The reason why I chose this particular article is because of the timeframe mentioned (2022-2023), the information is timely and aligns with current financial planning considerations. The information is also sourced from a reputable financial institution, TD Direct Investing, and hence the credibility. The article doesn't just highlight the importance of RRSP contributions but also provides practical tips and considerations

Website #4

sakshamrajput7814 — 2023-12-05 14:03:27 UTC

The article explores the debate between experts on paying down a mortgage or investing in RRSP, given current low mortgage rates.

Three key questions guide the decision:

1) Financial Discipline: Disciplined savers may benefit from addressing the mortgage first, while those less disciplined might find RRSPs more suitable.

2) Risk Tolerance: Prioritizing mortgage repayment is advisable if debt causes anxiety, while contributing to RRSPs may suit those fearing an insecure retirement. 3) Mathematics: If the mortgage interest rate is 3% higher than the average annual return from the retirement portfolio, debt repayment is recommended. The approach encourages considering financial habits, anxieties, and mathematical assessments for informed decisions.

The article is chosen because it gives practical and relevant guidance for people dealing with this common financial choice.

Website #3

sakshamrajput7814 — 2023-12-05 14:08:11 UTC

The article provides an overview of mortgages, defining them as agreements between borrowers and lenders, granting lenders the right to seize property if repayments aren't made. It emphasizes using mortgage loans for home purchases or leveraging existing home values. The article lists seven key considerations when selecting a mortgage, including loan size, interest rate, closing costs, Annual Percentage Rate (APR), type of interest rate, loan term, and potential risky features. It advises prioritizing affordability over qualification, urging readers to assess their income, expenses, and savings priorities. Additionally, it highlights the importance of factoring in additional costs like insurance and taxes when calculating monthly payments for a realistic budget.

The article's emphasis on considering additional costs, like insurance and taxes, enhances its practicality. Overall, the article is chosen for its informative content, accessibility, and relevance to individuals seeking guidance on mortgage-related decisions.

Image #1

sakshamrajput7814 — 2023-12-05 14:22:23 UTC

This image shows the process of Mortgage.

I chose this image because it explains the process of mortgage in a very simple form. The image shows that the bank granted the family a $100,000 mortgage to buy a $150,000 house. They also put a down payment of $50,000.

Image #2

sakshamrajput7814 — 2023-12-05 14:34:22 UTC

This image shows 5 reason to have an RRSP.

I chose this image because it provides different reasons as to why one would invest in an RRSP. It shows various reasons like combined RRSP, Using RRSP to pay for education or a home, contributions are non tax-deductible etc.

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

sakshamrajput7814 — 2023-12-05 14:42:41 UTC

What surprised me the most is, I went into this topic believing that RRSP's are a much better option than a Mortgage, because they are always seen as a burden and the RRSP seems like a cheat-code (Just like GTA) to avoid paying taxes while saving some money. But through my research I realized in the long run a Mortgage is always better the option.

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

sakshamrajput7814 — 2023-12-05 14:46:50 UTC

This topic is interesting to me because I have always grown up hearing Mortgages are bad, they are a burden or how people lose their houses because of not paying back Mortgage. My girlfriend and I are currently in talks about buying an apartment. This topic gave me an insight on how mortgages work and how they are a better option for me right now.

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?

sakshamrajput7814 — 2023-12-05 14:49:41 UTC

If I were to provide advice to a family member or friend, the most important thing to convey would likely be the idea of a RRSP. Individually, if a person does not own a house and has no mortgage to pay, an RRSP makes sense and would be a safety-net for their retirement. I would share my knowledge about RRSP's.

sakshamrajput7814 — 2023-12-05 15:02:31 UTC

Welcome to our discussion on the important financial decision of investing in Registered Retirement Savings Plans (RRSPs) versus paying down a mortgage. In this exploration, we'll navigate the key considerations surrounding these two strategies, helping you understand the implications for your financial future. Join me as we break down the nuances of RRSP investments and mortgage payments, guiding you towards informed decisions aligned with your financial goals. Let's delve into the choices that can shape your financial well-being.