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.