Should I pay down my mortgage or put money into my RRSP?

Heidi U. Pullem
CFP, CDFA

Do both, and get two bangs for the same dollar!

By contributing to your RSP (or your spouse’s RSP) you instantly benefit by reducing your taxable income and receiving a tax refund. You also benefit long term as your RSP then compounds tax free, so your retirement nest egg grows larger.

When you get your tax refund do something significant with it. Paying down debt is a great choice, but consider all your debt, not just your mortgage. With mortgage rates so low, you may be better off using your tax refund to pay down higher interest credit cards or personal loans (unless they are for investment purposes).

The power of investing early is significant. Those who focus on paying off their mortgage first, then contributing to their RSP later, often find they can never catch up. I.e. investing $5,000 per year @ 8% for 10 years ($50,000 total) then leaving it 10 years, would provide $169,198. If you delayed investing for 10 years (while you paid off your mortgage) even investing twice as much; $10,000 per year @ 8% for 10 years ($100,000 total), you would only have $152,455.

Make your money work as hard as you do.