Save When your Deductions Stop

by Achieva Financial
Aug August 02

Are you making the most of your increased paycheque once your CPP and EI deductions stop for the year?

The maximum pensionable earnings for 2017 are $55,300; with a basic exemption of $3,500, and the maximum EI insurable earnings of $51,300. Once you’ve hit the maximum contribution amount, you will no longer have these deductions on your paycheque. Why not sock aside this increase in your take home net pay for the rest of the year?

When your deductions stop, you can maximize your savings by adding this money to your RRSP or TFSA, or another savings account. Year after year, this extra boost to your savings will grow through the power of compound interest. For instance, if you take home an extra $1,000 after these deductions stop, and you invest it annually for 25 years, you will end up with more than $36,000 at an interest rate of 2.35%!

If you have any debt, whether it be a mortgage, credit card, or line of credit it may also be worthwhile to use that money to make an extra payment to pay down that debt. An extra payment will cut the amount of interest you’ll be paying on that debt, allowing you to get debt-free sooner, and devote extra income in the future to your savings.

While it may be tempting to use that extra money on an expensive item or extra getaway, by resisting instant gratification and putting the money to use in your savings or to pay down debt, you will end up further ahead in the future.