The deadline has past for your 2012 RRSP contributions, but that doesn’t mean you can’t get started on your 2013 contributions!
I’ve already talked about how to use your RRSP for home ownership but today I want to address another thing you can do with your RRSP, which is using it for school. Students can withdraw funds from their RRSP to finance their full-time education or that of a spouses. This money can be used at specific educational institutions in Canada and can be used to pay for tuition, books and courses to help you finish your degree.
This money will need to be paid back within 10 years, usually paying 1/10th of the balance owed per year via schedule 7 on your tax return.
While this may be great for some people I personally I don’t see myself as someone who would use my RRSP for my education. Here are some of the pros and cons I came up with:
Pros:
- You will get and education and hopefully make more money after you finish your degree
- It’s an interest free loan
Cons:
- Your money isn’t growing and earning interest to further yourself financially
- You can only borrow up to $20,000 which may not be enough to cover the cost of your program
* Here is the form you need to fill out to get started.
What do you think? Would you ever use an RRSP for anything other than home ownership?
You can get an interest-free loan from the government that you can pay back over 10 years. The interest charged may be less than what you’ve forfeited in growth in the 11-14 years that you’ve borrowed money from your RRSP. Also, most people at 18 don’t have RRSPs which makes me think that this plan is for older people who are returning to school — which makes it even worse! If you want to return to school, save up your money and pay tuition in cash — especially since you’ll be closer to retirement
I completely agree with you. The closer you are to retirement the worse it is to touch the money in that account!