RRSP Top-up vs. Mortgage Pay-down


Well it’s that time of year where all the pundits weigh in on how to spend your extra money (assuming you have any). Good cases may be made for topping up your RRSP as well as for paying down your mortgage and the inevitable conclusion is to top-up your RRSP and then use the tax refund to pay-down your mortgage. Cop-out answer!

Like most things in life there is no “one-size-fits-all” answer. First, you need to determine if you should contribute to an RRSP. If you are someone who will continue to have a high income during your senior years then an RRSP might not be a good option at all! On the other hand if you are self-employed or commissioned with no pension then an RRSP is a brilliant idea and should be maximized each year. That’s not to say you shouldn’t invest, but there may be smarter choices.

The same pros and cons go for paying down your mortgage. While the thought of being mortgage free, brings on visions of broken shackles and running barefoot on the beach it may not be the best financial move. We are at a period of record low rates with some of us lucky enough to have mortgages in the 2.0% range. Surely you have better things to do with your money than pay that down. I’d be making a case to use that extra money for a trip to Paris with my Sweetheart.

All said and done, beware the generic advice! Educate yourself on the options, find a good financial planner and sketch out a plan that addresses your unique needs.

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