You can do this by borrowing money to
invest in stocks outside of your RRSP, while you make withdrawals from your RRSP. This is
the same strategy used in borrowing to invest. It converts a portion of
your RRSP withdrawal income, which is fully taxed, into Canadian dividends and capital gains,
which are taxed at lower rates and/or allow you to defer tax. This is
done by offsetting a portion of the RRSP withdrawal with the interest
expense on the funds borrowed to invest.
Of course, you would have to borrow a significant
amount in order to achieve the tax savings. We do not recommend this strategy
unless you have experience in the stock market! At times the stock market is very volatile, and if
you have no experience you may panic and make bad decisions. Our advice is to slowly
invest in stocks, work your way up to borrowing to invest, and then use this
strategy when you retire, or start shortly before you retire.
past, we provided an Excel worksheet, the Shelter RRSPs Calculator, which
did some analysis on this. Although it was being downloaded frequently by visitors to our site,
we had very little
feedback, so we didn't really know how it was being used. This worksheet
has been discontinued.
You can check out our Borrow to Invest
Revised: September 21, 2013