|
Tax-Sheltered Compounding
Your RSP’s investment earnings compound tax-free until they are withdrawn.
While many people focus on the upfront tax deduction, tax-sheltered compounding plays an even more important role in building your retirement savings.
Consider what happens with a regular
unsheltered investment. Tax takes as
much as 50¢ from every dollar earned.
You not only lose that money, but
also the future compounding on it.
So, the 6% you thought you were
getting is really more like 3% after tax.
And if inflation averages 3% annually,
your capital isn’t growing in “real”
– post-inflation – terms. In an RSP, the
same investment would truly earn 6%,
and your capital would grow at 3%
a year after inflation.
|
