The RRSP Loan Strategy, Explained💸
Borrow money specifically to contribute to your RRSP, then use the tax refund to pay most of it back. Here's how it works:
1. Take a short-term loan and contribute it to your RRSP before the deadline
2. That contribution lowers your taxable income, generating a refund
3. Use the refund to pay down most of the loan right away
4. The rest keeps growing tax-deferred for retirement
The math: contribute $14,400 at a ~40% marginal tax rate, get back roughly $5,760 as a refund. Pay that toward the loan, and your real out-of-pocket cost drops to about $8,640, while the full $14,400 keeps compounding.
The rule that makes or breaks it: loan interest has to stay smaller than your refund, and you pay it off fast, ideally within 12 months.
Best for: unused RRSP room, a decent marginal tax rate, and the discipline to pay it off quickly.
Skip it if you're carrying high-interest debt already.
Not financial advice, just how the math works.
