31 Jan Contribute to an RRSP or Pay Down one’s mortgage?
Now, here’s an important question to reflect on at the beginning of every year. Once we enter a new year, one of the first things we need to worry about is tax season. This is year, the deadline to make a contribution to your RRSP regarding the 2019 tax year is March 2. If you have a mortgage, you may find this decision to be a bit more difficult.
In this situation, you need to analyze your finances. Should you make extra payments towards your mortgage? Should you contribute to your RRSP? Should you put the money towards other debts you may have?
There are many factors to consider and each person’s case is a unique one. If you earn a higher income, it might be a good idea to consider contributing to the RRSP plan. If you are in a low tax bracket right now, you may want to save that contribution room for later.
Communication is another important aspect to consider: talk to a mortgage broker, to an accountant about the best options in this situation. You may be a person who really doesn’t like debt, and a professional opinion on this matter will help you make the best decisions. Don’t forget that the investment needs to make sense and be a higher interest rate than you would be paying on the mortgage.
If you are planning to retire soon, then talk to a mortgage broker. You may want to retire free of a mortgage, but that all depends on how much of a mortgage you have. You also need think about the type of mortgage you have, whether you are locked in and have to pay penalties. You may want to think about accelerating your payments – if you have that option.
Do you have debt outside your mortgage? If so, and if the interest rates are higher than a mortgage, you may want to eliminate that debt before your mortgage or even before considering putting money towards an RRSP.
Above all remember: these are not easy decisions to make and should be thoroughly analyzed. Contact us at the TCG Lending Centres. Our agents will be more than glad to sit down with you and help you with your situation.