Investments : How to invest in an RRSP in Canada

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.

There are many advantages to using RRSPs for retirement savings, including:

• Tax-sheltered growth (tax deferral)
• Tax-deductible contributions (tax refund)
• Tax deductions carried forward
• Choice of investments (stocks, bonds, mutual funds, exchange-traded funds, etc.)
• Withdrawals taxed at marginal tax rate (generally lower at retirement)
• Tax-free withdrawals for Home Buyers’ Plan (HBP) and Lifelong Learning Plan (LLP), as needed.

Find out more about RRSPs :

You can open an RRSP account at a number of financial institutions in Canada, including :

• Bank
• Credit Union
• Insurance company
• Trust company
• Robo-advisor (e.g. Wealthsimple Managed Investing)
• Online brokerage platforms (e.g. Wealthsimple Trade, Questrade and Qtrade Direct Investing)

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.

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):

• Cash
• Savings account
• Guaranteed Investment Certificates (GICs) (e.g. Tangerine GIC and EQ Bank GIC)
• Money Market funds
• Mutual Funds
• Government or Corporate obligations
• Company shares (stocks)
• Exchange Traded Funds (ETFs)
• Asset allocation ETFs
• Call and put options
• Real estate investment trusts (REITs)