RRSPs can help you buy a home

An RRSP can be used for more than just your golden years. A financial advisor can also help you utilize your RRSP to earn money or help you purchase a home.

Shekher Puri, an RBC Royal Bank branch manager in Mississauga, shares an example:

"I was advising a South Asian couple (in the country for only a couple of years) who were looking to purchase a home that spring. They had an RRSP, but their contributions weren’t maximized; I found that they had a lot of unused room in their plan.

"I told them that if they contributed a certain amount more into their RRSP before the tax deadline, they would get a healthy tax refund, which they could use toward the cost of their home." Puri then told them about the federal Firsttime Home Buyer’s Plan. "That allows people to take up to $20,000 out of their RRSP to put toward a down payment."

With these two pieces of advice, the couple was able to save money from their own pocket, put down a bigger down payment and be in their new home sooner than expected. "If you’re coming into build a better future for your family, then an RRSP really can help with that future."

Need-to-knows of RRSPs

In order to take full advantage of your RRSP, here are a few things you might find useful:

- Whatever your age or personal situation, it’s never too early to contribute. Fact is, the earlier you start making contributions, the better off you’ll be.

- Make your contributions before the yearly deadline. To claim a deduction on your taxes for the current year (say 2007), you can make contributions anytime during the year (2007), or up to 60 days into the following year (2008).

- Know your RRSP contribution limits. Did you know there is a limit on how much you can contribute each year? Your allowable RRSP contribution is the lower of 18 per cent of your earned income from the previous year or the Canada Revenue Agency’s maximum annual contribution limit (which, for 2007, is $19,000), less a pension adjustment if you are a member of a pension plan. Your limit is provided by the Canada Revenue Agency when you file your income tax returns.