Supercharge your RRSP for FREE

Feb 15, 2017

Virtually every financial planner will tell you that RRSP’s are great when you factor in the tax refund you get from investing in them … especially if you re-invest it back into RRSP’s.  We know that well intended plans sound great but when you get a cheque back from the government you get so excited because, well, the government GAVE you money instead of TAKING money from you and so you spend it. We’ve been there, it’s a great feeling, and we have done the same at some point in time.

However, we wouldn’t be doing a great job if we just left it that. You do have options that may not result in the purchase of a new TV right away but they will give you an upper hand when your ‘know-it-all’ neighbour starts talking about investments.

There are essentially 3 strategies that all follow the same core fundamental: borrow money. This can sound risky but if you have lots of RRSP room, and have the emotional capacity to responsibly borrow this can make a SIGNIFICANT impact in your retirement.

There are a few things to keep in mind:

  • when you borrow money to invest, the interest payment are a tax write-off.
  • A larger amount of money has the potential to generate larger amounts of money.

Strategy 1 “Gross-up” this option should not cost you any money.
With a simple calculation, we can help you determine the exact amount of money you should borrow so that your tax refund will completely pay off the loan before any loan payments are due (a few weeks later when the refund comes back after filing your tax return).  Example: If you’re in a 40% tax bracket and have $3,000 available, you could borrow an extra $2,000 to make a $5,000 RRSP contribution. This should generate a refund of $5,000 x 40% = $2,000, which is equal to the loan amount thus enabling you to pay it off completely and almost immediately.
Doing this year after year does not cost you any money but can add up to thousands and thousands of extra ‘Free” money for your retirement.

Strategy 2 “Top-up” – this will cost you a bit of money.
With this strategy, you borrow a small-medium amount of money and paid it off completely within a year. Example: If you have $3,000 available and want to contribute $10,000 this year, you could borrow $7,000. This would generate a $10,000 contribution and a $10,000 x 40% = $4,000 refund. The $4,000 refund is used to reduce the $7,000 loan to $3,000, which you pay off within a year.
With money, the more invested, the more it can earn. Example: $1,000 investment at 5% interest rate will grow to $1,628 over 10 years. A $10,000 investment at 5% will grow to $16,288 in 10 years. This strategy creates a larger pool of money in which to potentially generate more money.

Strategy 3 “Catch-up” - this is a longer-term strategy to maximize your RRSP’s.
This is where you borrow a larger amount to temporarily “catch up” on all (or a large portion) of your unused contribution room. Even after reducing the loan with the refund, the loan might take up to 10 years to pay off. Example: You have $25,000 of unused room. In a 40% tax bracket, you could borrow $22,000 to add to your $3,000 for a $25,000 contribution. The $25,000 x 40% = $10,000 refund reduces the loan to $12,000, which is paid off over say 10 years.
Note: Borrowing money should always be done with strict diligence and only consider an amount that is financially and emotionally comfortable for you, which might mean none.

Investing shouldn’t be something that causes you stress; you have more important things to do. We believe you should LIVE FOR TODAY, BECAUSE WE’VE GOT YOUR FUTURE COVERED.
We provide you with unbiased professional management and a disciplined process that manages your overall levels of risk and return, ensuring it is customized to your needs.  We deliver:

  • Reduced Management Fees – even lower than the banks, in most cases.
  • Unbiased Investment Recommendations – we don’t provide investment options from just one institution, we have access to almost all of them.
  • Free Privately Managed Portfolios – We believe that everyone should have access to unbiased, proactive, and honest financial planning and that means that it should be free. There are no additional costs when you deal with us.

With us, you never have to sacrifice one thing for another. We know our stuff and we make it simple for you. Regular communications, including market updates, reports, and meetings ensure that you have a clear understanding of where you are, where you are going, and how you are doing at all times.


Pamela Coquet
Financial Strategist at Savanti Wealth

Want some more information? Send us an email or give us a call and we can help you at or (403)968-8443


Additional References on the RRSP Gross Up Strategy:
How to Super Charge your RRSP - Toronto Star
Tax Refund Strategies – Manulife Financial
Handling RRSP Refunds – The Chronical Herald

Savanti is your no-nonsense, get it done, always got your back, tell it to you straight, make you laugh, and there if you need to cry - financial partner.

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