From February 16 to 19, 2010, MoneySense.ca’s top financial planners are answering your RRSP questions. For the full list of questions answered — or to submit a question of your own — click here.
I am 29 years old, and recently married. I work in the public service and plan to stay there for the rest of my career. My husband is a graphic designer and has no pension plan with his company. We recently bought a house and have a mortgage of $282,000. We have student loans around $15,000. Other than that, we don’t have any debt.
Should we be putting money into RRSP or should we be paying off our loans more aggressively? Is a TFSA a better option that a RRSP at this point? We have around $500 a month extra after payments to be putting somewhere. — JRB
Warren Mackenzie and Ken Hawkins: Normally we would recommend paying off debt before contributing to an RRSP. However you are young, interest rates are low and there is a concern that there might be a secular rise in inflation of the next number of years. In a period of rising inflation it is better to be a borrower rather than a lender. If the interest rate on your loans is fixed, in an inflationary environment there will be a greater advantage to investing versus paying down the loans.
Put money into your husband’s RRSP and TFSA and TSFA for both.
Have a different opinion? Let us know in the comments.