Many of you are familiar with the Registered Retirement Savings Plan (RRSP). But did you know that you can invest in your RRSP, for example, with stocks and exchange-traded funds? In fact, it’s these investments that allow you to build a tax-deferred retirement fund and wealth. This article explains how to invest within your RRSP. But first, we’ll take a look at the RRSP and its advantages for retirement savings.
An RRSP is a savings plan registered with the Canada Revenue Agency (CRA) that allows you to save tax-free for your retirement. Your RRSP contributions are tax-deductible, and your investment income is tax-free until disbursed at retirement. What’s more, your contributions reduce your taxable income and earn you a tax refund.
There are several types of RRSP: individual, spousal, group and self-directed. You can open and contribute to several RRSPs, as long as the sum of your contributions does not exceed your contribution room. This contribution room represents 18% of your previous year’s income (up to the annual limit), plus your unused deductions from previous years.
RRSPs are often associated with savings products, such as RRSP savings accounts and RRSP GICs. However, you can (should) invest in your RRSP, as returns are not taxed until retirement. You can invest in assets that will grow over the years, such as stocks and exchange-traded funds.
The maximum you can contribute to your RRSP is 18% of your previous year’s eligible earnings, up to the annual limit ($31,560 in 2024 and $32,490 in 2025). To this must be added your unused deductions from previous years. To find out how much you can contribute to your RRSP, consult your Notice of assessment sent by the CRA.
You can contribute to your RRSP no later than the first 60 days of the following year. For example, for the year 2024, the deadline for contributing to your RRSP is March 1, 2025.
There are many advantages to using RRSPs for retirement savings, including:
Find out more about RRSPs :
You can open an RRSP account at a number of financial institutions in Canada, including :
The process of opening an account is quick and easy. However, investment choices vary depending on the location you choose. For example, with a financial advisor, you’ll generally be limited to your bank’s mutual funds. Conversely, with a brokerage platform, you’ll be able to invest your RRSP in stocks, exchange-traded funds (ETFs), and more.
There are many ways to invest in an RRSP. However, investment choices vary depending on a number of factors.
First, if you decide to open an RRSP with a financial advisor, he or she will need to assess your current situation, your financial goals and your investor profile. Then, select investments for you, such as guaranteed investment certificates or mutual funds. These funds will have to meet your investor profile: conservative, balanced, growth, etc.
If you decide instead to open an RRSP with a robo-advisor, the investment choices will be different. The robo-advisor will also need to assess your current situation and financial goals, then select investments for you. The investments selected are generally exchange-traded funds, since their management fees are lower than those of mutual funds.
Finally, if you decide to manage your own investments on an online brokerage platform, you can invest your RRSP in a wide range of financial assets: stocks, bonds, exchange-traded funds (ETFs), options, real estate investment trust (REITs), etc. However, to make the right investment choices, you need to know your investor profile. If you don’t already know it, you can use the tool provided by the Autorité des marchés financiers (AMF).
You can invest your RRSP in the stock market using investments managed by robo-advisors or investments you manage yourself on an online brokerage platform.
The best-known robo-advisors in Canada are : Wealthsimple Managed Investing, Qtrade Managed Portfolios and Questwealth Portfolios (Questrade)
Online brokerage platforms are offered primarily by financial institutions, such as CIBC Investor’s Edge, and. But they are also offered by independent companies, such as Wealthsimple Trade, Questrade and Qtrade Direct Investing. These independent platforms have been growing rapidly in recent years.
As mentioned earlier, an RRSP is not an investment, nor is it limited to savings. Rather, it is an account in which you can invest.
Here are the investments eligible for an RRSP (the first being savings-related and the last being investment-related):
Most Canadian financial institutions offer RRSP calculators. These are useful because they allow you to see the growth of your retirement savings over several decades.
What’s more, some calculators allow you to determine your ideal contribution amount, based on your current situation and retirement goals.
Finally, more advanced RRSP calculators let you estimate your tax refund and see the effect of your RRSP contributions on personal tax credits and benefits, such as the GST/HST credit and the Canada Child Allowance (CCA).
In short, an RRSP is not an investment, nor is it limited to savings. Rather, it’s an account in which you can invest. In fact, you can invest your RRSP in stocks, exchange-traded funds and more. These investments will grow tax-free over the long term, hopefully allowing you to maintain the same standard of living in retirement.
An RRSP is a registered plan that allows you to save for your retirement. Your contributions are tax-deductible, and your earnings are tax-free until disbursed at retirement.
There’s no one-size-fits-all answer. Depending on your current situation and goals, it may be best to contribute to your RRSP, your TFSA, or both.
An RRSP is not an investment and has no interest rate. It’s a savings plan in which you can make investments such as GICs, stocks and ETFs. It is these investments that provide returns (interest income, dividends and capital gains).
The maximum RRSP contribution in 2024 is the lesser of the annual limit determined by the CRA ($31,560 in 2024) or 18% of your eligible income for the previous year. The deadline for contributing to your RRSP is March 1, 2025.
Savings are here:
