Refresh my memory : RRSP question

[Feneant]

Am I supposed to borrow from my credit line to invest in my RRSP or not? I am fairly sure it is recommended, but damn me if I can remember for sure.

Thanks in advance.

[Jono]

Conventional wisdom is that it makes sense to borrow to maximize your RRSP contribution as long as you will be able to repay it within 12 months assuming your tax refund also went towards repaying your loan.

Normally when you borrow to invest in income-producing property you can deduct the interest, however this deduction is specifically denied when you borrow to make an RRSP contribution.

[Dungeon]

You should think about investing in working ventures. In sask say i buy
3500.00 in working ventures in my rrsp i get
15% of 3500.00 or 525.00 provincial tax credit
15% of 3500.00 or 525.00 federal tax credit
plus i use the 3500.00 as an rrsp contribution

I assume its the same or similar in other provinces.

Just a thought and no i don't get any commision or anything just advice take it how u want to

[TrevorK]

When you borrow to invest, the interest you pay is a tax deduction.

[ctam]

Am I supposed to borrow from my credit line to invest in my RRSP or not? I am fairly sure it is recommended, but damn me if I can remember for sure.

Thanks in advance.

What you are doing is call leveraging. You are using a loan to generate asset. Better consult a financial consultant. This is not for everyone. Just b/c your neighbour is doing it, doesn't mean is right for you. You have to look at your timeframe, risk tolerance and amount you are working with. Good luck.

[Jono]

When you borrow to invest, the interest you pay is a tax deduction.

However, you cannot deduct the interest on funds invested in an RRSP.

From CRA website: http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/faq-e.html#deduct

[Feneant]

Thanks for the replies. I couldn't max it, but I still borrowed some money to at least put something into it. Honestly, I don't even know how much my max contribution is so I invested an amount where the credit line will be paid off within 3 months.

Actually, I don't quite understand it, do these pay dividend? All of a sudden this morning, I could swear my account went up by 17% and I took no action on it. I can't figure it out as everything on it appears the same, but it's as if one share jumped in value over the year and it only reflected today.

[Jono]

You should think about investing in working ventures. In sask say i buy
3500.00 in working ventures in my rrsp i get
15% of 3500.00 or 525.00 provincial tax credit
15% of 3500.00 or 525.00 federal tax credit
plus i use the 3500.00 as an rrsp contribution

I assume its the same or similar in other provinces.

Just a thought and no i don't get any commision or anything just advice take it how u want to

This is a Labour Sponsored Venture Capital Corporation. They exist in each province, but investors are restricted to residents of the province the fund is set up in. Despite the tax savings, these are high risk and speculative investments. Just take a look at what has happened to Manitoba investors of the Crocus Fund - the fund has halted trading while it revalues its portfolio. They are estimating that the most recent unit value of approx. $10 will be reduced to $6 once the fund resumes trading in a few weeks. Despite that, the fund has barely made any money since its inception. If you do plan to invest in any form of tax shelter, be sure it is a good investment first, and then investigate the tax savings.

[Jono]

I don't even know how much my max contribution is so I invested an amount where the credit line will be paid off within 3 months.

Find out your contribution limit here: http://www.cra-arc.gc.ca/tax/individuals/topics/rrsp/faq-e.html#year

Actually, I don't quite understand it, do these pay dividend? All of a sudden this morning, I could swear my account went up by 17% and I took no action on it. I can't figure it out as everything on it appears the same, but it's as if one share jumped in value over the year and it only reflected today.

It depends what you have invested in. If you bought shares of a growth or equity mutual fund, the value of these shares will increase over time - this is the investment return that you sought when purchasing them.

If you bought an income producing fund, the fund will periodically distribute more shares to you, so that your total investment will be worth more, even though the individual share prices may not increase significantly.

If you made a 17% return over the past year - congratulations, it sounds like your investments are peforming quite well.