(NC)—If saving for retirement seems like a far off goal, consider this: your Registered Retirement Savings Plan can be put to work earlier than you may think – in fact, it’s not just retirees who can benefit from this long-term savings vehicle. First-time home buyers, or people interested in higher education, can put their RRSP savings to work long before they are ready to retire.
“For people whose near-term financial goals include home ownership or funding their education, adding to their retirement account may not be a top priority,” says Carol Bezaire, vice-president of tax and estate planning for Mackenzie Financial. “However, if they consider the benefits of an immediate tax deduction added to future goals, they may find they can achieve more of their goals sooner.”
Bezaire points out two other ways that an RRSP can be used:
The Home Buyers Plan allows first-time home buyers to take out up to $25,000 per individual to buy or build a qualifying home for themselves or a relative with a disability. There are no taxes paid on withdrawal, and home buyers have up to 15 years to repay the RRSP. You lose the investment power of the borrowed funds but you can budget to pay yourself back sooner than the 15 years if you want to.
The Lifelong Learning Plan is another use of RRSP dollars that allows Canadians to remove up to $20,000 from their RRSPs to head back to school. This includes paying for education or training for a spouse or common-law partner. The withdrawals can be to a maximum of $10,000 in any one year or spread over four years. The account holder has 10 years to repay the RRSP.
“People interested in either option should sit down with a financial advisor to discuss the best strategy for saving, withdrawing from, and paying back their RRSP,” says Bezaire. “A well planned and properly funded retirement should be every investor’s goal, but if that seems too far off, then consider a way to put savings to work to achieve other priorities throughout earning years as well.”