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|I Am Skooter|
So here's us, on the raggedy edge.
The Globe and Mail offers a wonderful lesson in editing a newspaper in this weekend’s edition, with two articles from the business section that directly contradict each other.
The first advocates paying down debt instead of contributing to your RRSP, the second advocate increasing your debt load in order to contribute to your RRSP.
On page B1 of the Weekend 27.01.07 edition, this article appears:
Top up the RRSP or pay down debt? Most Canadians just don’t get it
…instaed of making RRSP contributions, he uses extra cash to pay down his mortgage. RRSPs have their place, [David Trahair] says. But most Canadians — particularly those with mortgages, car loans and hefty credit card balances — are better off eliminating household debts before putting a penny into an RRSP.
The article concludes:
“The vast majority of Canadians just don’t get it,” Mr. Trahair says.
You don’t have be one of them.
On page B9, this article appears:
Got some RRSP room? A loan can mean a bigger pot in the golden years
The article does point out, in fairness…
You can generally get an RRSP loan at prime rate — currently 6 per cent — if the term is a year or less and you’re a good customer.
Sophisticated investors understand that this stategy is effective if the interest rate is lower than your RRSP’s rate of return but the second article doesn’t point this out explicitly, nor does it point out the risk that an investor incurs by making a single larger contribution as opposed to a number of smaller contributions (dollar cost averaging is the only investment strategy that’s guaranteed to reduce risk.)
What a crazy time of year this is, RRSP season, with financial advisors and institutions falling all over themselves to put your money somewhere. I just wish the Globe wouldn’t provide this type of contradictory advice.