http://www.investingintelligently.com/2005/10/30/paying-down-student-loans-vs-contributing-to-an-rrsp/ Not just another (Canadian) financial blog Tue, 07 Sep 2010 16:52:29 +0000 http://wordpress.org/?v=abc http://www.investingintelligently.com/2005/10/30/paying-down-student-loans-vs-contributing-to-an-rrsp/#comment-6203 Dave Mon, 19 Feb 2007 10:10:45 +0000 http://www.investingintelligently.com/2005/10/30/paying-down-student-loans-vs-contributing-to-an-rrsp/#comment-6203 Shame on me, I neglected to consider the fact that the money inside the RRSP will be taxed upon withdrawal. Shame on me, I neglected to consider the fact that the money inside the RRSP will be taxed upon withdrawal.

]]> http://www.investingintelligently.com/2005/10/30/paying-down-student-loans-vs-contributing-to-an-rrsp/#comment-88 Investing Intelligently » Blog Archive » Pay Down That Debt With Your Tax Refund Tue, 17 Jan 2006 06:36:46 +0000 http://www.investingintelligently.com/2005/10/30/paying-down-student-loans-vs-contributing-to-an-rrsp/#comment-88 [...] We could pay more in principal every month to our loan, and this is not a bad idea. Every dollar paid to the principal is equivalent to a dollar contributed into a fixed-income investment which pays interest at the same interest rate as the loan. So paying down principal is like a fixed-income investment. Instead of increasing the principal we pay down every month, we have chosen to maximize our RRSPs first and foremost, which is something I discussed in a previous article. Under the assumption that over the long term our RRSP will achieve a rate of return roughly similar to the loan interest rate, this is a great idea because the return of the RRSP will match the return of the loan (again, treat the loan as a fixed-income investment) but we will also get a bonus: a tax rebate will be generated from the RRSP deductions (because income contributed into an RRSP is tax-deferred). [...] [...] We could pay more in principal every month to our loan, and this is not a bad idea. Every dollar paid to the principal is equivalent to a dollar contributed into a fixed-income investment which pays interest at the same interest rate as the loan. So paying down principal is like a fixed-income investment. Instead of increasing the principal we pay down every month, we have chosen to maximize our RRSPs first and foremost, which is something I discussed in a previous article. Under the assumption that over the long term our RRSP will achieve a rate of return roughly similar to the loan interest rate, this is a great idea because the return of the RRSP will match the return of the loan (again, treat the loan as a fixed-income investment) but we will also get a bonus: a tax rebate will be generated from the RRSP deductions (because income contributed into an RRSP is tax-deferred). [...]

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