Tips/Strategies for Saving for your 1st Home
Unless you’ve been living under a rock for the past 10-20 years, you may have noticed the price of real estate increasing considerably over this period of time. Perhaps that’s why the rock made sense to live under. It is becoming more difficult for anybody trying to buy their 1st home in this market, especially if you are also trying to save for other financial goals, such as retirement, at the same time. It may seem difficult to choose between saving money for retirement and saving for a down-payment. Why not do both? Under the RRSP 1st time home buyers plan, you can withdraw and use up to $35,000 from your RRSP as part of a down-payment. This $35,000 withdrawal will remain tax-deferred (until retirement) as long as you contribute the $35,000 back into your RRSP over the 15 years following the purchase of the property. So why not just save $35,000 outside of an RRSP and be done with it? Because making an RRSP contribution may provide you with a refund. These annual tax refunds can then be used to make annual lump sum contributions into another savings account, such as a TFSA. This will allow you to save in the RRSP first (which will initially be used as part of a down-payment, and then once replenished, will make up a part of your retirement savings), and the potential refunds that come from the RRSP contributions, can be used to increase the size of your down-payment. Your RRSP can be a great savings tool for not only retirement, but for your 1st home purchase as well.
Written by:
Jon Glougie, CFP®, CIM®
Associate Portfolio Manager and Insurance Advisor
Luft Financial, iA Private Wealth
