Retirement Savings, RRSP Savings for Financial Freedom

The Retirement Savings, freedom savings, or RRSP Season is here. You must act before March 1, 2006 to get yourself a Tax Deduction and a Tax Refund Cheque . Most people understand financial freedom as an RRSP Contribution. Believe me, the RRSP Contribution is indeed the first step. It can be equated to Grade I in the Grade XII school system. Then our Mortgage Freedom and our insurance Investing would be equated to University and Graduate School education in finances. In every venture, one must start somewhere. Let’s focus on the basics in this RRSP fast tract to mortgage freedom.

The Bank Teller will give you the basic $1000.00 to $4000.00 yearly RRSP contribution. The loan, must be repaid in one year. There is no planning here. But this is what everyone does. With an additional $200 to $400.00 per month repayment on the RRSP loan, we struggle for one or maybe two years with this plan Our finances are jammed, stuck. We find it too hard. So we give up. This savings thing does not work!!An alternate savings plan, favored by those who preach no loans is to have payroll deductions such as the Canada Savings Bonds Plan. As ambitious Savers, we would agree to a $200 or $300 dollar pay roll deduction from each pay cheque. We would try this for a few years. Then, after the first real, family emergency, we are stuck once again. The take home pay is not enough. We give up. We must find something better. So we go searching and we find new plans. The RRSP Catch-up Contribution Loan is the next stop on our road to freedom savings.

The idea of the Catch-up Contribution loan is to find a lender who will allow a $10,000 to $25,000.00 RRSP “Catch up Contribution Loan. With this plan, your savings start with a more respectable Retirement or RRSP Investment. Let’s say $20,000.00. We get a Tax Receipt and a huge Tax Refund cheque, of let’s say $7.000.00 or $8,000.00, whatever our marginal tax rate is. Usually, we are so delighted with this unexpected windfall, we spend it. ENJOY NOW !! Forget the future!!Let me explain the catch up retirement savings contribution idea. What we refer to here is the amount of money the IRS or Revenue Canada allows everyone to contribute to a 40K or an RRSP. The formula is spelled out by CRA rules as a example dictated by the Canadian finance department. Simplified, these rules allow about 18% of your income from the previous year to be contributed as retirement savings or an RRSP to a maximum of $16,500 for this year, 2006. If you missed an RRSP contribution for any one year, then CRA keeps a running tab of your unused Retirement Savings contributions. They report your “Unused Contribution Room” every year in replying to your Income Tax Returns. Most people ignore that portion of the NOTICE OF ASSESSMENT as the document is called here. But it is very important in that it tells how much savings you could contribute to a retirement nest egg if only you could find the money.

The good news is that a good Financial Advisor would find you that money. Lenders compete to offer RRSP and Investment Loans at unbelievable rates. These bargain rates start as low as PRIME MINUS ONE PERCENT. This is only one example of numerous takes on the same theme. With an experienced Advisor, you’ll receive University level if not graduate level advice to follow. You could pay the same $200 to $250 each month on a savings or RRSP loan and control a $20,000.00 Retirement Savings or RRSP Investment. Compare this to the Bank’s usual savings plan where your $4000.00 RRSP contribution must be repaid in One Year at a monthly loan repayment amount upward of $300.00 every month. Your freedom investment, a minute $4000.00.

Mortgage Freedom techniques and the Smart mortgage Action Guide show more sophisticated, university level strategies. Time does not allow long and detailed explanations which are found at the blog: http://www.mortgagemoneyletter.blogspot.com. Simply stated, these plans start with access to your home equity in a Smart Early Mortgage Repayment Plan. Because of the access to excess cash, perhaps as a draw from the home equity, perhaps from the line of Credit, we simply make another huge RRSP Contribution from an RRSP Loan. You must understand that these loans are extremely easy to get. This is the time when most of the lending rules are thrown out the window. Bad Credit no problem. Ratios too high, no problem! No job…. No problem. In fact. just last year, one Lender would approve everyone who signed their application for a maximum of $13,500.00 RRSP loan.

Unfortunately this program was abused. Many Borrowers took the loan, the tax deduction and the tax refund cheque, then refused to repay the loan. When faced with those hassles, the company gave up. They ended the program. Yes indeed. This was too good to be true. So the Broke Folks made it so. It was too good. So, it is no longer true. The program was shut down. This was a good program that lasted at least TEN YEARS.

Statistics never lie. 90 % of those who retire, retire broke. Or, they must continue to look for financial support during retirement. When you find that your plan is identical to the plan of everyone else, then for sure, you are on your way to meeting those statistics.

Good news rests with the 10% who step forward to get their EXISTING ,MORTGAGE SMARTENED with SMERP, The Smart mortgage Early Repayment Plan. The Plan, explained in the SMERP Action Guide, pays the mortgage off in half the time with savings above $250,000.00.