Bought House: RRSP for HBP - Should we or Shouldn't we?

[Four Pillars]

If I understand this correctly - are you saying I'd be able to put the money in 91 days prior, pull all 25k out in February 2013, and still claim it in portions over next couple of years?

Yes.

I want to. She's a teacher. Her argument is that she's going to have a very good pension when she retires and has "no use" for RRSP's. She has talked to a few financial advisors(who also happen to be her relatives) and they have advised her against putting any money into RRSP's.

That's actually a pretty good argument.

Is there any catch to this? IE: Today is November 1st. We close on Feb 13th, 2013. There's 104 days in between. If we put the money in tomorrow, the funds would be considered to be inserted 103 days prior and would be eligible for the withdrawal? Or is there some weird 90 "business day" rule that applies?

No, there isn't any catch. I just wanted to make sure you knew the rule existed which you obviously do.

[MoneyGal]

I want to. She's a teacher. Her argument is that she's going to have a very good pension when she retires and has "no use" for RRSP's. She has talked to a few financial advisors(who also happen to be her relatives) and they have advised her against putting any money into RRSP's.

This is a fine generic argument ("people with good pensions do not need to save additional funds in RRSPs") but it is not helpful in your specific case.

The reason you'd (she'd) put money in an RRSP now to withdraw through the HBP is tax arbitrage.

Forget the fact that the plan is called a "retirement savings plan" and think of it this way: would it be useful for you to get tax discount of $[x] today on a loan you establish to yourself and pay back over 15 years?

Also, the repaid loan could be withdrawn at any time you have lower-than-normal income, providing a form of emergency funding.

And even if you keep all the funds in the account until you actually retire, and then pay tax on them, you've effectively moved the tax on that income far far far into the future, providing a significant discount on those tax dollars.

In fact, even if you participate in the HBP and never even pay the funds back, you've still moved the tax due on that income as much as 15 years into the future.

No matter how you run the math on this, there's a measureable benefit and by design there is no way for this not to be true. Financial advisors who argue otherwise don't understand either the basic mechanics of RRSPs or basic financial math.

[jcgd]

*Puts hand up*

I've got a question on the subject. If I borrow money from my RRSP for the HBP and don't repay it the amount that was supposed to be repaid that year goes on my income. Is that contribution room lost just like if I simply pulled the money from my RRSP outside of the HBP?

[jtc]

No matter how you run the math on this, there's a measureable benefit and by design there is no way for this not to be true. Financial advisors who argue otherwise don't understand either the basic mechanics of RRSPs or basic financial math.

Thanks! This is what I sort of figured.

No, there isn't any catch. I just wanted to make sure you knew the rule existed which you obviously do.

Sorry to harp on this again. I've been researching this topic a bit online. Just to be absolutely clear, would it even be possible to deposit funds into an RRSP account after the closing date and withdraw it 90 days later, as long as it's in the same calendar year?




Also, should anyone find themselves as clueless regarding this topic as I was, it looks like all we have to is submit the following form to her our RRSP issuers(BMO, TD, ING, etc.):

http://www.cra-arc.gc.ca/E/pbg/tf/t1036/t1036-11e.pdf