5 reasons to put your pandemic savings into an RRSP

5 reasons to put your pandemic savings into an RRSP

More eating at home, little to no travel, fewer fill-ups... has the pandemic allowed you to save up more money than in previous years? Is this money just sitting in your bank account? Here are five reasons to take out an RRSP and make your money work harder for you!

Increased Savings: A trend since 2020

On average, with respect to income, Canadian households are saving more than in 2019. Savings grew quite dramatically (5.1% to 27.4%) as a result of the health and safety measures imposed from March to June 2020. Now’s the time to make these savings grow!

1. Versatility

The purpose of a registered retirement savings plan (RRSP) is obviously to save for retirement. However, it can also be used to finance major projects like:

  • Buying a first home with the Home Buyers' Plan (HBP)
  • Going back to school with the Lifelong Learning Plan (LLP)

RRSPs are useful financial vehicles for specific life events.

2. Tax Breaks

RRSP contributions are deducted from your income, so these amounts won’t be taxed. You will only pay taxes when you cash in your RRSP (no later than December 31 the year you turn 71).

This will enable you to grow your money tax-free (until retirement).

Remember that you can also contribute to your spouse’s RRSP.

Speak to your financial advisor to determine which options are best for you.

3. Interesting Returns

Depending on your situation, you will likely receive a tax refund. You can then use this amount to reimburse a debt, invest or both. This option is very worthwhile in the long run! Plus, if you get child benefits, contributing to an RRSP reduces your household income, which means your payments could increase.

4. Maxed Contributions

Like most people, you probably haven’t maxed out your yearly RRSP contributions. However, this also means that your contribution ceiling has increased accordingly. You therefore have the option of investing more this year, savings permitting.

To know your RRSP contribution ceiling, consult your most recent Notice of Assessment issued by the Canada Revenue Agency.

5. Plenty of Options

When it comes to RRSPs, banks and insurance companies have plenty of options: stocks, bonds, funds, portfolios…

There are options for every investor profile! Every investment is a good investment… as long as it suits your situation.

Please note that the segregated funds offered by insurance companies differ from products offered by banks, namely because of guaranteed capital. In the event of the holder’s death, the beneficiaries receive a percentage of the assets, regardless of market fluctuations.

Your Advisor Can Help

Financial security advisors are the people to refer to when it comes to RRSPs. Your advisor can help you identify your investor profile, your objectives and the investment vehicle that’s best for you. Contact yours today to talk about your investment needs!