Tag Archives: RRSP

Introducing the RRSP Snowball Technique

Hey everyone my name is Greg Tomkins from Simplemoneycanada.com. Today I’m going to show you a strategy that I like to call the RRSP Snowballing technique.


This technique works to increase the amount you can deposit into your RRSP year after year, without increasing the amount you personally need to save.


Usually what people do is they take their $1,000 a month, save it to their RRSP, then come tax time they spend the tax refund. This is not how an RRSP should be used.


What we are going to do instead, is invest that $1,000 a month, and also reinvest the tax refund back into the RRSP.


Right let’s take a look at how that looks for someone who makes $150,000 a year, saves $1,000 per month and invests their tax refund into the RRSP as well. I’ll assume a conservative 5% rate of return inside the RRSP.


What is an RRSP?

What is an RRSP?

The RRSP, also known as the Registered Retirement Savings Plan, is the primary retirement savings account for Canadians. The main benefit of the RRSP is the ability to defer income tax and grown investments tax free as a way of saving for retirement. In other words, money you put in today is not taxed, it grows tax free, and you only have to pay that tax when you withdraw.


RRSP Deposit chart


Just like the TFSA, an RRSP is not an investment. It is rather, a type of account that can be used to hold different types of investments. It is not uncommon for people to believe that the RRSP itself is an investment, as they are unaware of what they are invested in within the RRSP. You can hold a variety of different investments inside an RRSP.