Making the most of compound interest
By making your contributions early and contributing each year, you can experience a little RRSP magic – tax-sheltered compound growth.
Unlike a non-RRSP investment where returns (interest, dividends and realized capital gains) are subject to tax each year, your RRSP returns are sheltered from tax for as long as they remain in your RRSP. This allows your RRSP to take full advantage of compound growth opportunities illustrated by this table.
| The power of compound interest | |||
|---|---|---|---|
| Annual amount invested | $1,000 | $5,000 | $10,000 |
| Time | |||
| 10 years | $13,972 | $69,858 | $139,716 |
| 20 years | $38,993 | $194,964 | $389,927 |
| 30 years | $83,802 | $419,008 | $838,017 |
| 40 years | $164,048 | $820,238 | $1,640,477 |
| (Assumes a 6% annual compound return) | |||
Tip: To make the most of the magic of tax-sheltered compound interest
- start your RRSP as early as you can
- contribute to it regularly, at least every year
- don't leave your money idle - invest to earn a good return