Posted yesterday at 8:00 a.m.
Influenced by his grandfather, who made good investments in his life, Emmanuel Larouche, 30, began contributing to his RRSP in his twenties in order to use his savings to buy a house. He finally realized this project and even if the amount he had accumulated in his RRSP was not enough to cover the down payment, it gave him a good boost.
Take advantage of the RAP
To withdraw the sum accumulated in his RRSP in order to buy his house, Emmanuel Larouche used the home buyers’ plan (RAP), which allows him to withdraw up to $35,000 without having to add it to his income. taxable. However, you must put the amount back into your RRSP within the next 15 years.
With the tax refund you get from your contributions that you can reinvest right away in your RRSP, the HBP is interesting because it helps you raise a down payment quickly.
Simon Préfontaine, financial planner at Lafond Financial Services
Prioritize
Now, Emmanuel Larouche continues to contribute a little to his RRSP, essentially to repay the amount taken out with the HBP. Should he contribute more? He asks himself the question because he and his spouse, who is 24, each have a pension plan at work. Then, the couple is expecting a baby in the coming months. The two lovebirds are not married, but their finances are joint and they put a little money every two weeks in a tax-free savings account (TFSA). “We may need this money soon,” he says.
Simon Préfontaine, financial planner, is not worried about this period when the young couple contributes little to their RRSPs. But he indicates that, in the coming years, spouses will have to take the time to analyze their situation and look at their priorities.
“They are expecting a baby, so they will have a lot of expenses, then we will have to consider the impact of parental leave on family income,” he says. In addition, they each have a pension plan, so it’s normal that right now, retirement is not their priority. »
Reduce your taxable income
Once the child is at daycare and the parents have fully returned to work, the time will be more appropriate to reassess the couple’s different priorities, believes Simon Préfontaine.
For retirement, it will be necessary in particular to see if their retirement plans have a good chance of covering all their needs, then to build a strategy accordingly.
Simon Préfontaine, financial planner at Lafond Financial Services
“If they need to save more, the RRSP could be interesting, especially if both are at fairly high salaries compared to what they expect to obtain in their careers,” he says.
In fact, an RRSP allows you to save for your retirement while reducing your taxable income, which is what you particularly want to do in the years when you earn the most. “Then, as parents, reducing their taxable family income could increase their federal and provincial family allowances,” adds Simon Préfontaine.
Make your money work
Even if the amounts saved in Emmanuel Larouche’s RRSP are not very high at the moment, Simon Préfontaine considers that the most important thing is to get into the habit of saving. “Emmanuel and his spouse are young, they are already saving and they have a lot of time ahead of them,” he says. As the habit of saving is taken, it should be quite easy later to increase the amounts. »
However, he stresses the importance of choosing the right investments. “The money invested in the RRSP will be there for a very long time, and over 30 or 40 years, a difference in return of 1% per year makes a huge difference,” says Simon Préfontaine. Taking the time to educate young savers on the calculated risk of volatility is very important so that they can make good decisions about their investments while respecting their investor profile. »