The RRSP Generator
Create Your Own Multiplier Effect
Like most Canadians,you may
have a budget that limits the
amount that you contribute to your
RRSP which makes it difficult to reach
your retirement goals.The RRSP
Generator is a strategy that overcomes
this obstacle by producing two times
the results of the conventional method.
It combines
three elements to create your own multiplier
effect.The three
elements are:an innovative borrowing
program,a specially structured invest
ment fund and RRSP contributions.
RRSP Generator Case Study
This case study will compare Sue
Standard ’s strategy with that of Meg
Multiplier.Each have:identical amounts
of taxable income each year,a $5,000
annual savings budget,pay taxes at the
40%marginal rate,and use the same
Canadian equity fund.
Although Canadian equities have
averaged 10%per year since 1924, 8% is
the assumption for this case study.
 Sue
makes tax deductible RRSP contributions of $5,000
per year for 12 years
earning 8% per year. At the end of 12 years Sue
Standard has
$102,476 with her conventional RRSP
approach.
Meg Multiplier (with the help
of her
advisor )arranges for a Canadian Bank
to advance her $100,000 with a tax
deductible interest cost of $5,000 (5%)
per year.
Meg invests the $100,000 into
the specially structured investment fund
that generates a tax free income
of $8,000 (8%)per year.Meg Multiplier
directs the $8,000 of income into an
RRSP for 12 years earning 8%.The
$8,000 RRSP deduction for Meg
produces tax savings of $3,200 which
are applied against the loan each year. At the
end of 12 years,the loan
balance is $61,000. At the end of 12 years, Meg
Multiplier has $163,962 in
RRSP ’s and $100,000 in the“generator ” fund.
Subtract the $61,000 remaining on the bank
loan results in a net value of
$202,262 compared to Sue ’s
$102,476. Using the RRSP Generator strategy, Meg
Multiplier ends up with almost twice as
much as Sue Standard.
Conclusion
Borrowing to invest can be an effective
long-term wealth building strategy.The
RRSP Generator Strategy implements an
easy borrowing solution to maximize
the potential of your investments. By
using this strategy,you may be closer to
a more comfortable retirement.
This strategy has additional risks
involved. An experienced and qualified
financial advisor is important in order to
structure this opportunity with the least
risk.Call to find out more. |
