RRSP loans help you maximize your retirement savings. The more you can put away and the earlier you do it, the better. Just as it's important to open an RRSP, it's equally important to make sure you're getting the most out of your RRSP. That's where maximizing your contributions with RRSP loans and making smart RRSP withdrawals come into play.
An RRSP loan is a great way to ensure that you're maximizing your RRSP contributions. An RRSP loan gives you the funds you need to meet your full annual RRSP contribution amount of 18% (consult the CRA website for updates), or top up your unused contributions from previous years.
If you deposited $4,000 last year but could have deposited $15,000, an $11,000 personal loan would allow you to take full advantage of your annual contribution room. Furthermore, if you deposited a total of $4,000 for the last two years, a $26,000 loan would help make up the difference.
If you need to withdraw money from your RRSP, you can do so, but keep in mind you will be taxed on the amount you withdraw. There are only two exceptions to this rule: buying your first home, and borrowing from your RRSP to further your education.
You can take $25,000 out of your RRSP to buy a home under the Home Buyers' Plan (HBP). Remember to consult the CRA website to be sure your home meets the necessary requirements.
You can also withdraw money from your RRSP to pay for your education under the Lifelong Learning Plan (LLP). Do note however, withdrawn RRSP proceeds under the LLP can only be applied to your own education costs, or that of your spouse or common-law partner. Funding your children's education using these funds is not permitted.
If you choose to withdraw money from your RRSP under the HBP, you have to repay it within 15 years. Generally, you have to repay 1/15 of the total amount you withdrew for each year of your repayment period. Your repayment period starts the second year following the year you make your withdrawal. If you withdraw funds for reasons other than those listed above, you may face penalties in the form of additional taxes.
If you choose to withdraw money from your RRSP under the LLP, you have up to 10 years to make repayments to your RRSPs. Usually, each year you have to repay 1/10 of the total amount you withdrew until the full amount is repaid. You do not have to pay any interest on the amounts you withdrew. The latest year you can start repaying your LLP withdrawals is the fifth year after your first LLP withdrawal. However, in most cases, you have to start repaying your withdrawals before that year.
Prepare for the future and apply for a personal loan with CIBC
If you're interested in topping up your RRSP account with a personal loan, CIBC can help. Apply for an unsecured loan online, or speak with a CIBC advisor at 1-866-525-8622.