Should I pay off my mortgage or invest in an RRSP?
Both contributing to an RRSP and accumulating equity in a home, will contribute to your net worth and fiscal security, and both are worthwhile goals. When you make your RRSP contribution, you will get a tax break as high as half of your contribution, depending on your Marginal Tax Rate. Over time, RRSP holdings could well exceed the value of your home. For example: if you invested $10,000 in an RRSP over 20 years, that's $200,000 capital invested. If you are in a 50% tax bracket you could get about $100,000 of that principal back via deductions against your income, over the contributing years, to pay down the mortgage year by year. In this case, that amounts to about a $5,000 tax refund per year. Factor in the deferred growth on the RRSP investment at 8% per annum interest and your net worth substantially begins to grow. In this case your RRSP would be worth about $500,000 after 20 years.