Are you investing enough, soon enough? Most Canadians don’t have the ability to sock away 10% of their income. By the time the bills are paid and the children are fed most Canadian’s don’t have the ability to max out their RRSPs. Compound interest which is essential to our long-term financial well-being remains elusive. It’s a great concept that people with excess money discuss and encourage…
But there is a way to change that.
There’s a way for you too to benefit and secure a retirement income. The secret: transform your mortgage interest into tax refunds! Next to winning the lottery, nothing improves your cash flow more efficiently than reducing your income tax and doing so by making your mortgage tax-deductible.
For those of you that have been diligently paying down your mortgage and have equity in your home, you can utilize the Smith Manoeuver. To properly execute this plan you need to have a re-advanceable mortgage (ie: a mortgage that has a line of credit component). For every dollar that you pay down on your mortgage, your line of credit increases. You then use this line of credit to invest in income producing stocks. For this loan to be tax deductible you must invest in a non-registered account. RRSPs, RESPs and TFSAs do not qualify. With this product you should be investing in a Canadian dividend-paying company. The Smith Manoeuver requires that you have a minimum of 20% equity in your home.
For those of you that aren’t quite that far and don’t have the equity available, you can borrow equity from your home to start your RRSP, or other investment, fund. With interest rates at all-time lows, borrowing to invest is a strategy worth considering. When you invest in an RSP the amount equal to your investment is a tax deduction (the tax is defered until you withdraw the funds from your RSP). This can result in a significant income tax return. Your income tax return can then be re-invested or used to pay down existing higher interest debt.
Retirement is inevitable… let us help you enjoy it when you get there.