You don’t have to wait for retirement to benefit from your retirement fund. That is, if it is placed in a registered retirement savings plan (RRSP).
If you have already started to put money away in a retirement fund for yourself that is a great thing. You
know that in doing so, you are assuring a better standard of living for yourself in your old age. Some
people might be hesitant to take their money to just put it away in an RRSP because they need the cash
flow right now. There is a way to get the best of both worlds, depending on your specific situation.
Home Buyer’s Plan (HBP)
If you are planning on buying a home in a near future or in a couple of years, I would recommend you do
put your money in an RRSP instead of a savings account and here is why.
When you have money in an RRSP and you are a first-time homebuyer, you can benefit from the Home
Buyer’s Plan (HBP). This is a federal government program that allows you to take up to 35 000$ from
your RRSP to put it towards the purchase of your first home. That means that you won’t have to pay any
taxes on the amount you withdraw from your RRSP as you normally would if you were to take out your
money before retirement age.
Now, you’ll have to be mindful of where you have invested your RRSP. Though this Home Buyer’s plan
may allow you to withdraw your money tax-free, some RRSPs do not allow you to withdraw money. You
will have to validate this information with your bank.
Assuming your RRSPs are not group RRSPs or locked-in, you can benefit from this program if you meet
these conditions: you are considered a first-time home buyer, you have a written agreement for the
purchase of your home, you are a Canadian resident, you intend on occupying the purchased residence
within one year of purchase date.
To be considered a first-time homebuyer, you or your spouse (or common-law partner) did not occupy a
home that either of you owned in the last four years.
Overall, this is a great program that might benefit you greatly and help save you money. Inform yourself on how the specifics of your situation can affect your eligibility.