Borrowing to Contribute to RRSPs

I have a LOT of RRSP contribution room, well, I think it's a lot. My 2009 limit is $13, 116. Now while I wouldn't borrow the full amount - I wonder about the advantages of 'catching up' when it comes to RRSPs.

I read an article on CanadianParents.com, called Borrowing to Contribute which was written by Gail Vaz-Oxlade - and she supports it, big time! In reading the article, it would seem that the benefit does outweigh the interest you would pay. This is of course, only if you pay off the debt within one year and re-invest/pay off the RRSP loan with any refund you receive.

The latest I will start my Company Pension Plan in October, 2010, though I'm going to try to negotiate starting this in October, 2009. It becomes vested two years after I start, which means two years after I start, the company cannot take back the money they've contributed. I want to be 'caught up' within the next couple of years or so, to really start taking advantage of compound interest. I don't want to wait until my company pension plan kicks in (due to so many variables) to start seriously contributing.

Have you ever borrowed to contribute? What was your experience with that?

I will be credit card debt free in 11 days!


  1. I know many folk who do take out loans to help maximize their RRSP contributions. They use their Income Tax refund to help pay off this loan. I'm not in a position to do that. Hopefully one day. I don't even know what my maximum contribution could be.

  2. I did this in 2006-2007... I borrowed $5,500. And I don't regret it..... the loan's been paid off for a long time and it helped build up my RRSP portfolio.

    I'd love to be able to max out each year, but I just don't make enough... not yet anyway.

  3. @ Jolie - Each year after you do your taxes you should get a statement in the mail that summarize either what you owe or your return. On that form, it will tell you what your max RRSP contribution is.

    @Canadian - That's what I was thinking - it would be nice to take advantage of that compound interest!

  4. We have done this in the past. It is, I think, best if you actually do pay the loan in 1 year, and use your refund to pay down the loan. We never did that part, because tax refunds come during break-up, for which we were never well prepared. Make sure you can also make your current year contributions, too, so that you don't find yourself always behind. Of course, it is better to be 1 year behind than 20 years behind!


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