RRSP Loans How much should I borrow?
With the RRSP deadline quickly approaching, did you know that you could increase your RRSP contribution without having to dig deeper into your pockets?
By combining your existing funds available for deposit with an RRSP loan, you can increase the amount you deposit into your RRSP and use your refund to pay off the loan.
RRSP Loan Breakeven Point
You can determine the optimal amount to borrow so that your refund is equal to your loan amount knowing the funds that you have to contribute and your marginal tax rate.
The optimal amount is equal to:
Available Funds _ Available Funds
(1- Marginal Tax Rate)
If you have $6,000 to deposit into your RRSP, with a marginal tax rate of 45%, you can borrow $4,909 for a total deposit of $10,909.
The refund that you receive will be 45% of $10,909, or $4,909…the exact amount of your loan!
Talk to your financial advisor to find out if an RRSP loan strategy is right for you.
Weekly Tips
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- Let Equitable Life help you with the answers to be retirement ready. - December 24, 2007
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NOTE: You will need Adobe Acrobat Reader to view these documentsThis information is provided with the understanding that it does not render legal, accounting or other professional advice. Readers are advised to seek professional counsel from a financial advisor. Any amount that is allocated to a segregated fund is invested at the risk of the contractholder and may increase or decrease in value. Investors do not purchase units of the funds but, rather, an individual variable insurance contract. ® denotes a trademark of The Equitable Life Insurance Company of Canada.
