rrsp or extra mortgage payments

[jayne_a]

Dh and i both have rrsp's. I was thinking about stopping mine and putting them into extra mortgage payments so we can be mortgage free faster. Dh makes more money so the rrsp's do help him at tax time, plus his contributions are matched by the employer , but since i don't work much they don't help me at tax time. So in the end we'd still have rrsp contributions just with DH only and with just increasing my mortgage payment by $50 I'd be out of my mortgage 4 years sooner. (want to increase it by more than $50 it was just an example) what do you think? thanks

[Retiree]

janyne_a....... smart girl for giving this some serious thought.

If you're not working much and don't need the tax deduction, I'd definitely put the money into paying down the mortgage. Working toward living debt-free is a great goal and ending up debt-free makes life so much easier.

I am retired but a couple of years short of collecting my OAS and have only a small CPP. Two years ago I decided not to contribute to my RRSP, because the deduction is not much use to me. I've opted, instead, to take money out of my RRSP and contribute it to my TFSA because at this stage in my life, with such a low income, my tax hit is nil to minimal. This strategy just makes so much more sense that contribuing to the RRSP.

It sounds as if at your stage in life, without a big income, your money will be working better for you by being applied to your mortgage.

[GoStumpy]

If you choose to pay off the mortgage sooner by reducing your RRSP contributions, you must remember to UP your contributions significantly once the mortgage is paid off!

[jayne_a]

thanks for the advice. I am by no means close to retirement. I don't work much b/c I'm mostly at home with our young son. And we'd love to have the mortgage paid off before we have to start paying for his tuition. And since we don't have a very large mortgage, we figure it is a very realistic goal.

[brunt]

Remember, RRSP only delays tax, it does not save it. Paying off the mortgage is a sure-fire savings.

Sure, an argument can be made that a high-return RRSP is better, but as far as being able to sleep at night, nothing beats a mortgage-free house.

[ame555]

Another possible option, it to max out your husbands RRSP to get the most refund and put the refund on the mortgage.

Just don't forgot to put a little away somewhere for yourself!

[Gsxrboy]

Everyone has some excellent points! Especially ame555, awesome strategy that continues to contribute to retirement savings and paying off your mortgage faster.

It is hard to give a good road map for you since we need to know your ages, current amount in RRSP's, mortgage remaining and retirement goals. Putting personal information on here is not a good choice, but speaking with a professional is. Check out some credit union banks, they offer retirement planning for free. You have to remember when saving for retirement now is the time to begin planning, do you want to purchase a home in Florida during the winter months? Do you want to travel 2 or 3 times a year? Do you want to leave some money for the kids? Purchase a cottage? These are things you have to consider since you have to calculate how much you will need per year when you retire.

[Nayya]

Both are very important! The best for me is to max the RRSP (when I can) then invest the tax return into the mortgage.. then you have the best of both world!

[tobiwobi]

I personally go for the aggressive mortgage repayment myself. If my employer was matching my contribution, then it may be different, but they're not and I'm totally inclined to prepay mortgage and take that interest saved and put in my RSP, rather than the other way around.

But it's your choice!

[jayne_a]

Dh does Max out his employer matching contribution's each year. And no dh and I don't plan on traveling buying a cottage etc. We are both home bodies. we are gonna talk to our bank and get our payments increased once his annual raise comes in effect this way we won't be affecting our budget too much. We are still gonna decrease my rrsp contribution b/c it won't affect me. Thanks so much for the advice. This is why I love smart canucks .

[tobiwobi]

Dh does Max out his employer matching contribution's each year. And no dh and I don't plan on traveling buying a cottage etc. We are both home bodies. we are gonna talk to our bank and get our payments increased once his annual raise comes in effect this way we won't be affecting our budget too much. We are still gonna decrease my rrsp contribution b/c it won't affect me. Thanks so much for the advice. This is why I love smart canucks .

I'd do that too in your situation. you said 'with just increasing my mortgage payment by $50 I'd be out of my mortgage 4 years sooner.' but also look at how much less in mortgage interest you're going to pay - i bet it's in 10,000s !!

ps. you want to 'prepay', and NOT increase payment/payment match. You have a certain amount that you are allowed to prepay every year, and 100% of this goes toward the principal.

my bank also offered ..can't remember what they called it..payment match or fast track payments or something..but all that did is double up regular mortgage payments, so I would be paying toward both the principal and interest, so I pay faster but don't save on interest.

You want to max out your prepayment amount first.

[jasperandchar]

I'm a strong believer of paying off your mortgage as quickly as possible & when it's paid off you can then put the $ towards your retirement at that time. Best of luck with your decision.

[suziehenderson]

I would have to agree that paying off your mortgage would be your best move. Think of the interest your saving yourself every week or month.

[kanewtz]

I am a firm believer in doing both personally.

What you can do is a spousal RRSP whereas you would contribute however, your husband would be able to deduct from his income (and thus lower his taxable income level). You could max out that way.

I don't know the situation with work or what pensions are like, but I have always been keen on never relying on my companies pension plan to support me when I retire.

[kanewtz]

I am a firm believer in doing both personally.

What you can do is a spousal RRSP whereas you would contribute however, your husband would be able to deduct from his income (and thus lower his taxable income level). You could max out that way.

I don't know the situation with work or what pensions are like, but I have always been keen on never relying on my companies pension plan to support me when I retire.

Here's a link: http://www.cra-arc.gc.ca/tx/ndvdls/t.../spsl-eng.html