Got a refund?  Think RRSP

If you anticipate receiving a tax refund, you may already be dreaming about how to spend it – maybe a trip or a new IPad.  Here’s a better idea:  use your refund to top up your RRSP (Registered Retirement Savings Plan) and enjoy a bigger nest egg when you need it.

If you contribute now for the current year, you will be putting your money to work almost a year earlier than those who wait until the the last minute.  You will maximize the tax savings and tax-deferred growth that make RRSPs so attractive in the first place.

Let’s say your reinvest your tax refund of $2,000 in your RRSP.  You will then have a $2,000 tax deduction for 2010 representing a $700 tax savings (assuming a 35% marginal tax rate).   Not bad for reinvesting the government’s money!  If you invested this $2,000 tax refund for 30 years and earned an average of 6% per year, your $2,000 would grow to almost $11,500!

For other effective ways to put your tax refund to work for you, give us a call.