A common question is should I save in my RRSP or pay down my mortgage? I believe the answer is both. In meeting with clients one of the most celebrated financial accomplishments for many is when they are finally debt free. Saving outside of the mortgage offers diversification, and saving in the home for retirement often means selling the home to access the money. Both the RRSP and paying down your mortgage offer you a home and funds to draw from to fund your life style.If you want a math answer look at the previous post, a home for tax reasons can be compared to a TFSA, no tax benefit on the money in, no tax on the money out (principal residence only).
I believe the answer to this question lies in your ideal balance. Some people need more money saved to be comfortable, others feel more comfortable with less debt. Another important consideration is how you spend. For example if you buy a more expensive home every time you have a little equity, RRSP’s would likely provide a larger net worth. If you are likely to pay you home down quickly and continue to live there as you build your savings then your balance may be towards paying down debt. The third consideration is what would make you feel more successful? I find the more we do that makes us feel successful, the more success we tend to have.
In my life, I have always found a balance that includes both paying my mortgage down and investing. I really enjoy investing and seeing the account grow.
Whichever you choose, saving money and building net worth will only make your financial life easier. Saving with the wrong option is almost always better than not saving at all.
This post has been kept general, to find out if an RRSP is right for you, it is advised that you seek a professional opinion. Details on RRSP’s can be found on the Government of Canada website. This information is assumed correct, but is for information purposes only and it is up to the reader to verify it’s accuracy before acting on anything written on this site. More details about the use of the content can be found on the site disclaimer located under the “Getting to know us” tab. We do not offer any tax or legal advice.
This entry was posted on Thursday, February 18th, 2010 at 8:57 pm and is filed under Financial. You can follow any responses to this entry through the RSS 2.0 feed.
