Episode #10 - Two Minutes to a Better RSP: Borrowing to Invest
Announcer: Welcome to The Money Clip podcast series from The Vault, Scotiabank’s online guide to helping Canadians get ahead financially. Listen in to gain a deeper understanding of your personal finances and find out how a few small changes to the way you manage your money can make a big difference.Michael Seaton: Thank you for joining us on The Money Clip podcast series from Scotiabank. I’m your host, Michael Seaton, and with The Money Clip we provide Canadians with a deeper understanding of personal finance and money-related matters. This is our series titled “Two Minutes to a Better RSP”. We hope to put you on the path to understand how to maximize your retirement savings plan as the deadline approaches. This is our fourth episode in the RSP series, and our subject today is borrowing to invest. Many may think it is a strange concept, but how do you know if it’s a good idea to borrow in order to contribute to your RSP? Well, depending on your unique situation, borrowing to invest in an RSP may help you reach your goals and could be a very good idea. For instance, if you have a lot of unused contribution room, it may be a good way to catch up for several reasons. First, because contribution room you have not yet used from as far back as 1991 is carried over to subsequent years. You can find out how much unused contribution room you have by checking your most recent notice of assessment on your tax return. Second, even though interest rates have risen recently, they are still at relatively low rates. This makes borrowing an attractive option. Third, the long-term benefits usually outweigh the short-term interest costs, especially if you borrow only what you can pay back quickly. Now borrowing to top up your contribution may even lead to a larger tax refund, which you can then apply as a lump sum payment to pay down the loan faster. There are two main borrowing options if you’re looking at borrowing to invest: either a loan or a line of credit. A line of credit is the more flexible option and can be used any time you need funds for your RSP. And if your line of credit is secured, you may be able to borrow at better rates. Expert advice can help you determine if borrowing to invest in your RSP is right for your situation. Check out online calculators and speak to your financial advisor to see if borrowing to invest in your RSP is right for you.
This has been another Two Minutes to a Better RSP podcast. Keep listening for more in this series as we take two minutes to review tips and suggestions to help you reach your retirement goals. Thank you for listening.
Announcer: Do you have any thoughts on today’s show? We’d love for you to get involved and become part of the conversation. Send us your questions, comments or money management tips so that we can address them in future podcasts. Our email address is themoneyclip@scotiabank.com and our call-in number is 1-866-652-5333. The Money Clip is brought to you by The Vault at Scotiabank. Be sure to tune in again next time.