RRSP questions?

sunmoon

A friend said he would borrow money from a bank to buy RRSP in order for maximum tax return eligible. After the tax return is deposited in your bank, he would cancel the loan and return all money back to the bank next month.

Does this really work? Lets say you borrow $10,000 for RRSP for $3000 tax return, then you pay back the bank with this $3000 + $7000 out of your pocket money. So.... your net contribution is only $7000 for $10,000 RRSP contribution. Is that how it works?

I used to only buy sufficient RRSP in order to push down the taxable income to the lowest tax bracket. Is this what most people would do?

快樂牛郎

個問題同果D低B數學IQ題咁似

fibbi

1# sunmoon


True but you need to pay interest....
Actually...all "borrowing" action = "spend future $".
So next year part of your income goes to return the loan. Then the year after you may not have $ for RRSP again...then you borrow again?

fibbi

2# 快樂牛郎


哎呀，阿牛哥，唔係個個好似你喺投資方面咁knowlegeable嘛。雖然有時條數好似計得通，但係樓主問都係想知多啲嗟。

我以前都借過RRSP loan，但係我覺得啲interest幾"拿利"，加上點都係先洗未來錢嘅一種，所以我無再做。

快樂牛郎

2# 快樂牛郎


哎呀，阿牛哥，唔係個個好似你喺投資方面咁knowlegeable嘛。雖然有時條數好似計得通，但係樓主問都係想知多啲嗟。

我以前都借過RRSP loan，但係我覺得啲interest幾"拿利"，加上點都係先洗未來錢嘅 ...
fibbi 發表於 2010/1/31 14:57

No, I wasn't talking about RRSP investment.  I was just commenting on the part where sunmoon said you could buy $10,000 of RRSP with "only $7,000".

sunmoon

2# 快樂牛郎


哎呀，阿牛哥，唔係個個好似你喺投資方面咁knowlegeable嘛。雖然有時條數好似計得通，但係樓主問都係想知多啲嗟。

我以前都借過RRSP loan，但係我覺得啲interest幾"拿利"，加上點都係先洗未來錢嘅 ...
fibbi 發表於 2010-1-31 15:57

Hi Fibbi,
Thanks for your understanding.
I really don't know mah; otherwise, I would not post this.  You are right, it is like "先洗未來錢".
Thanks.

快樂牛郎

If you don't even save enough for your RRSP contribution, that's pretty pathetic and you shouldn't make any contribution at all.

tofu

people will top up their rrsp usually is because they believe their income will significantly drop or they need their rrsp for llp or hbp
rrsp loan interest rate is usually around prime, which is much lower than most personal loans or credit cards.  you can get the loan and use the refund toward higher interest rate debt.  
rrsp loan is not really 先洗未來錢, since you didn't spend the money.  the money is still in your pocket, of course if you need to take out fund from rrsp, you need to pay tax la.  if you don't have any saving habit, it may be force you to save some money

快樂牛郎

it's a scam

fibbi

8# tofu


"rrsp loan is not really 先洗未來錢, since you didn't spend the money.  the money is still in your pocket, of course if you need to take out fund from rrsp, you need to pay tax la.  if you don't have any saving habit, it may be force you to save some money"

What I really mean is....say you got RRSP loan, yes the $ is in your pocket, you are not taking it out. But when you need to pay back the loan later on, your future income is becoming less because you need to repay the loan. So in a way, you got RRSP loan this year to get more RRSP saving, but in fact you will get less $ to spend (or save) in future when your repay the loan. I see this as "spending future $".