Borrowing from your RRSP: A Hilarious Guide (for Desperate Times Only)
Hey there, financially-flexible friend (or soon-to-be friend)! Ever stared at your RRSP contribution limit with the same yearning one feels for that last slice of pizza? You're not alone. But before you start raiding your retirement nest egg like a squirrel with a gambling addiction, let's explore the slightly-less-crazy option of borrowing from your RRSP.
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| How To Borrow Money From Rrsp |
Don't Panic (But Maybe Sweat a Little)
First things first, borrowing from your RRSP is not like borrowing a cup of sugar from your neighbor. This is serious business, with tax implications and potential penalties lurking in the shadows (more on that later). So, take a deep breath, grab a stress ball shaped like a piggy bank, and let's dive in.
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The Two Flavors of Borrowing (No, it's not Money and Problems)
There are actually two legitimate ways to borrow from your RRSP:
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- The Home Buyers' Plan (HBP): This lets you withdraw up to $35,000 (that's a lot of pizza!) to buy your first home. Think of it as your RRSP playing matchmaker with your dream house. Just remember, you gotta pay it back within 15 years, or the tax man will come knocking (and it won't be with a housewarming gift).
- The Lifelong Learning Plan (LLP): Feeling like your brain needs a vacation to the School of Hard Knocks (but with actual learning this time)? The LLP lets you borrow up to $10,000 per year, to a maximum of $20,000, to finance your education. So, you can finally become that astronaut you always dreamed of being (even if it's just in your head, with a fancy space helmet). Just like the HBP, you have up to 15 years to repay the borrowed amount.
The Not-So-Fun Part: Repaying Your Loan (and Avoiding Tax Trouble)
Here's where things get a little less rosy. When you borrow from your RRSP, you're essentially taking money out of your future self's pocket. So, you'll need to pay it back, and on top of that, you'll be taxed on the withdrawn amount (unless it's used for the HBP or LLP).
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Think of it like borrowing a friend's car, but instead of just returning it, you also have to buy them a new one and pay for the gas you used. Not ideal, but hey, at least you got to drive the fancy car for a while!
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Here are some additional things to keep in mind:
- Talk to a financial advisor before making any decisions. They can help you crunch the numbers and see if borrowing from your RRSP is the right move for you.
- Don't borrow more than you can afford to repay. Remember, you'll still have to live after you've finished paying off your loan.
- Don't use your RRSP loan for frivolous things. This money is meant to help you achieve your long-term goals, not buy the latest gadget.
Remember, borrowing from your RRSP should be a last resort. But if you find yourself in a situation where it's the only option, do your research, make an informed decision, and hopefully, you'll be able to navigate the financial maze without getting too lost.
And hey, if all else fails, there's always the option of selling your childhood stamp collection. Just sayin'.
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