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A registered retirement savings plan ( RRSP ) is an investment that is registered with the Canadian federal government. RRSPs are often described as being “tax-advantaged.” That means you don’t pay income tax on the amount you are contributing to an RRSP, in the year you earn that contribution. However, you will have to pay income tax when you withdraw money during your retirement. The advantage is built on the assumption that your income is higher now than it will be in retirement. If you plan things right, you will be in a lower tax bracket in retirement, meaning that you pay less tax on your withdrawals than you saved initially by stashing your money inside an RRSP. You can open an RRSP and contribute income up until the year you turn 71, at which point it has to become a registered retirement income fund ( RRIF ) and you begin to withdraw the money as taxable income. Read on to learn about the best RRSP accounts in Canada.
The best RRSP accounts in Canada for 2022
- Best RRSP savings account: EQ Bank RSP Savings Account* (1.25%)
- Best robo-advisors: Questwealth Portfolio and Wealthsimple Invest*
- Best brokerage account for passive investing: Wealthsimple Trade*
- Best brokerage account for active traders: Questrade
- Best brokerage account for mutual funds: Qtrade*
Best RRSP savings account:
EQ Bank RSP Savings Account* At 1.25%, EQ Bank is currently offering the highest interest rate available on a savings account in Canada. If you’re looking for a no-risk and stable way to grow your RRSP funds, this account may be the right place to put your money. The EQ Bank RSP Savings Account could be ideal if you’re nearing retirement and don’t want to worry about investment fluctuations, or if you’re an aspiring first-time home buyer planning on leveraging the Home Buyers’ Plan and want to safely invest your down payment. There’s no minimum balance or monthly account fees. And EQ Bank, owned and operated by Canada’s ninth-largest Schedule 1 bank Equitable Bank, is a member of the Canada Deposit Insurance Corporation , just like with the big banks. (Up to $100,000 of your deposit is insured by this Government of Canada Crown corporation.)
Interest rate: 1.25%
Minimum balance: None
Open an EQ Bank RSP Savings Account*
Best robo-advisors for automated, hands-off investing:
Questwealth Portfolios* Whether you’re just starting out with investing in RRSPs or want a “set it and forget it” component to complement your other investments, a robo-advisor like Questwealth Portfolios* offers an all-in-one solution tailored to your risk tolerance and objectives through an online questionnaire you’re given when you sign up. Questwealth’s fees are among the lowest in the business, ranging from 0.2% to 0.25%, depending on the size of your portfolio. You can choose from five broad portfolio types, ranging from aggressive (with 98% equity) to conservative (which has a mix of 80% fixed income and 20% equity). Based on your responses to its risk tolerance and goals questionnaire, the platform will recommend a type that meets your investment needs and level of comfort. Your portfolio is then actively managed, adjusting with market conditions. Features like tax-loss harvesting and automated dividend reinvestment are included to maximize your returns—all without you having to lift a finger. The minimum investment required is $1,000, which makes investing with Questwealth quite accessible. And, though Questwealth is an online-first platform, Questwealth is regulated by the Investment Industry Regulatory Organization of Canada (IIROC) and is a member of Canadian Investor Protection Fund (CIPF), just like the big banks. The platform has more than $20 billion in assets under management and has won multiple awards, including Canada’s Best Managed Companies. Finally, should you require any help, you can connect an agent over live chat or the phone.
Learn more about Questwealth Portfolios*
Wealthsimple Invest* Like Questwealth Portfolios, Wealthsimple is a robo-advisor firm that matches you to a low-cost portfolio of diversified ETFs for a one-stop, hands-off RRSP investing experience. However, it is not the same as the Questwealth model, in that Wealthsimple Invest* truly adheres to the principles of passive investing which means that there are no managers actively tweaking portfolios to adjust to market conditions. The goal is to match the market, not beat it, which is arguably the most effective and sustainable strategy long term, in part because the fees are low and don’t take a big bite out of your returns. In terms of portfolios, Wealthsimple’s offerings correlate with varying risk scores—from conservative to growth—each featuring a different mix of equity and fixed income. There are even Halal and socially responsible portfolios. Another Wealthsimple’s feature is the ability to round up your everyday purchases to the nearest dollar and invest the difference using your debit or credit card. So, let’s say you bought a cup of coffee for $2.75; Wealthsimple will automatically invest $0.25. Designed to be extremely user-friendly, Wealthsimple’s site and app are easy to use and noted for its sleek mobile experience. Wealthsimple’s fees are slightly higher than Questwealth’s, ranging from 0.4% to 0.5%, depending on how much you have invested. But you should know that the fees on your first $10,000 invested are waived for the first year. Also, there’s no minimum account amount. Wealthsimple is regulated by the IIROC and is a member of the CIPF, just like the big banks. It has more than $8.4 billion in assets under management and 1.5 million clients.
Learn more about Wealthsimple Invest*
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Best for DIY investors: If you prefer to make your individual investments rather than relying on pre-built portfolios, an online brokerage can help achieve your RRSP investment goals.
For passive ETF investors: Wealthsimple Trade*
An absolute game-changer, Wealthsimple Trade* is the only trading platform in Canada with no commissions. With most other online brokerages charging anywhere from $4.95 to $9.99 per trade, using a Wealthsimple Trade* account will save you big from the first trade you complete. Wealthsimple Trade* is ideal for passive investors looking to buy diversified ETFs listed on the TSX and NEO Canadian stock exchanges. This means you can track the performance of specific market segments, indexes and the global stock market. Wealthsimple Trade* offers RRSP and TFSA options. This is a simple platform with no-in depth analytics tools or stock screeners. Additionally, account holders are not permitted to hold U.S. dollars, so you can’t leverage the strategy of Norbert’s Gambit to minimize currency fees when buying U.S. equities. However, these are features more geared towards active investors—not passive ETF investors, for whom Wealthsimple Trade* is hard to beat.
Account, maintenance and low-activity fees: $0
Portfolio: Access to thousands of ETFs listed on the TSX and NEO exchanges (including popular all-in-one funds from Vanguard and iShares)
Foreign currency fees: 1.5% when buying and selling equities listed on the NYSE
Learn more about Wealthsimple Trade*
For more active/experienced investors: Questrade*
Questrade boasts some of the lowest commission fees in the business. It costs nothing to buy ETFs, and buying or selling equities is only $0.01 per share (with a minimum charge of $4.95 up to $9.95). This is far more appealing than the high flat rates charged by the big banks, and there are no quarterly or monthly account fees or low activity fees. With a Questrade account (also offering spousal accounts), you aren’t limited to trading stocks and ETFs. You can trade on IPOs, precious metals and more, and with the ability to hold U.S. dollars, you can leverage Norbert’s Gambit to minimize the cost of currency conversions when buying and selling U.S. equities listed directly on the NYSE. A Questrade account gets you access to research tools like intraday Trader and Investment reports, and you can add tools from Questrade partners like Wealthica and VectorVest.
Account, maintenance and low-activity fees: $0
Commissions: $0 when buying ETFs, $0.01 per share on equities (min $4.95, maximum $9.95)
Portfolio: Ability to hold U.S. dollars and leverage the strategy known as Norbert’s Gambit Foreign to minimize foreign fees when trading equities listed on the NYSE
Learn more about Questrade*
For mutual fund investors: Qtrade* At a flat rate of $8.75 per trade, Qtrade* charges a higher commission on stocks and ETFs than Questrade, but it eliminates commissions on mutual funds, which might be a savvy trade-off for those looking to invest in their RRSPs this way. There’s a $25 administration fee billed quarterly, but if you establish recurring deposits or hold a minimum of $25,000, you can get a waiver. Qtrade* enjoys a reputation for offering stellar customer service and was recently awarded to be the best online self-directed brokerage experience by Surviscor. A note-worthy perk: When new and existing clients open a new Qtrade account and deposit/transfer at least $15,000 in assets (by March, 2022), they can earn up to $2,000 cash back.
Account fees: $25 per quarter (can be waived when certain conditions are met)
Commissions: $0 when buying/selling mutual funds; $8.75 per trade for most equities
Learn more about Qtrade*
What is a Registered Retirement Savings Account (RRSP)?
An RRSP is a retirement savings plan that you open at a bank or other financial institution. You can do that either in person or online, depending on the services offered by your chosen institution. RRSPs are registered by the federal government of Canada, which specifies the maximum amount each Canadian can contribute to it each year. What is an RRSP good for? Well, there are two big benefits to saving or investing inside an RRSP: One, your money is allowed to grow tax-free until you need to withdraw it; and two, you get an immediate break on the income tax you would otherwise pay on the amount you contribute each year, up to your annual limit.
What are the types of RRSPs available?
You can use an RRSP to save money for your own retirement, as well as your spouse’s. If your employer offers a group RRSP and will match a portion of your contributions, sign up for it: Your employer’s contribution alone gives you a no-risk return on your investment that would be tough to match anywhere.
Individual RRSP The government sets a contribution limit for RRSPs each year (the 2022 contribution limit can be found here). You can contribute a total of 18% of your income or a maximum of $27,830 ( the limit for 2021 ), whichever is less. If you pay into an employer-sponsored pension plan, then those contributions are also deducted from your contribution limit. If you contribute less than your contribution limit for a given year, then you are also able to carry over any unused contribution to future years.
Spousal RRSP In addition to contributing to an RRSP for yourself, you can also contribute to your spouse’s RRSP. Contributions to a spousal RRSP still count toward your own contribution limit, but this can be a smart way to split your income for tax purposes in retirement. Any taxable earnings from your RRSPs will be split between the two spouses in retirement, which can help lower your tax bracket.
Group RRSPs (GRRSPs) Group registered retirement savings plans (GRRSPs) are essentially RRSPs that are set up by employers. These can come with benefits such as contribution matching (sometimes referred to as a “top up”) and automatic payroll deductions, so your contributions are handled for you on an ongoing basis. If a GRRSP with contribution matching is available through your employer, this should be the first place you invest for your retirement. Note that amounts you contribute to a GRRSP count against your annual RRSP limit.
What kinds of investments can I hold inside my RRSP?
There’s a wide variety of investments you can hold inside an RRSP—and you don’t have to stick to just one, or even two. Depending on your investment horizon (the amount of time until you need to draw money from your RRSP in retirement), risk tolerance and other personal factors, using a mix of low-risk savings accounts and GICs for safety, along with perhaps some exchange-traded funds and even individual stocks for growth, can offer diversification. Note that not every kind of investment can be held in an RRSP. Non-qualified investments include: Investing in businesses in which you hold an interest of 10% or higher, precious metals that are not gold or silver, commodity futures, private holding companies or private foreign corporations, your own debt, and personal property.
Savings accounts The most straightforward way to save your money is to put it in a savings account . While this will yield a lower interest than other forms of investment, it is also a no-risk decision. What’s more, you can always decide to take the accessible cash you have in your RRSP and use it to purchase other investments within the same RRSP accounts down the road. So, if you are still trying to sort out which investments are best for you, you can walk into any major bank or financial institution tomorrow and start deferring your taxable income right away.
Guaranteed Investment Certificates (GICs) Guaranteed investment certificates (GICs) are another very low-risk investment that you can set up within an RRSP at any bank or financial institution. GICs offer a guaranteed rate of investment on predetermined terms. You could buy a 1-year GIC that would pay, let’s say, a 1.0% rate, or a 5-year GIC that would pay 2.0%. One main drawback is that interest earned on GICs is usually subject to tax rates that can be as high as 50%. When GICs are held within an RRSP, however, they are sheltered from those taxes.
Mutual funds Professionally managed mutual funds are a popular choice offered at major banks and financial institutions for RRSP investments. Mutual funds are made from a variety of investments that are bundled together in one fund. This makes it easier for your investments to be diversified and, therefore, offer less risk than when compared with investing directly in the stock market. Professionally managed mutual funds do, however, incur management fees that can be as high as 2.0% per year.
Exchange-Traded Funds (ETFs) Exchange-traded funds ( ETFs ) are relatively new to the investment scene in Canada, but are an excellent choice for people interested in exploring a self-directed RRSP that gives you more control over your investments. ETFs are collections of stocks and bonds that are designed to track the stock market over time. So, as the market goes up over time, so does your investment. When the market dips, however, you will also lose money. ETFs are a good option for those who can tolerate some risk and are not considering withdrawing money from their RRSPs in the short term. Robo-advisors that calibrate your investments with a computer algorithm rather than a professional advisor are great options for saving on management fees with ETFs. Consider firms such as Questwealth*, BMO’s SmartFolio and Wealthsimple, among others.
Stocks and bonds Self-directed investors who want to buy individual stocks and bonds can certainly hold those investments in an RRSP as well. Stocks, in particular, tend to be more volatile investments and should be geared toward people with a higher tolerance for risk who are comfortable taking a long view of maximizing their investment. You can either work with a conventional broker or use an online broker to manage your investments on your own.
What are some ways to leverage my RRSP savings without paying a penalty?
In addition to giving you a tax-deferred place to save towards your retirement goals without, an RRSP is a tool you can tap into to help with two major life expenses: buying your first home; and pursuing further education. In both cases you can withdraw a portion of your RRSP funds without having to pay tax or penalties, as long as you adhere to a specified repayment plan.
Home Buyers’ Plan (HBP) The Home Buyers’ Plan (HBP) is a program that allows first-time home buyers to leverage their tax-deductible RRSP savings to use as a downpayment on their home. It essentially allows home buyers to borrow up to $35,000 per person from their RRSPs and then repay that money back into their RRSPs over a 15-year period. Any failure to meet the scheduled repayments in any given year will result in having the unpaid amount taxed at your top rate .
Lifelong Learning Plan (LLP) The Lifelong Learning Plan (LLP) is a similar program that allows RRSP holders to withdraw money for the purpose of pursuing additional education . You can withdraw up to $10,000 per year and up to a total of $20,000 and are given 10 years to repay the full amount, in the same way HBP withdrawals are repaid. The LLP can be used to pay for your own education or your spouse’s, but not your children’s. Once it is repaid in full, you are free to use the program again.
RRSP alternatives: TFSA vs RRSP Canadians can also choose to invest their savings in tax-free savings accounts ( TFSAs ) . There are circumstances that would make a TFSA (which does not defer tax on contributions and instead offers tax-free growth and withdrawals at any time) a smarter choice. If you think you might need the money before your retirement, a TFSA will allow you to withdraw as much as you want, whenever you want. The flip-side of that equation, however, is that easier access to your money might derail your retirement planning in the long run.
Should I invest in a TFSA instead? Remember that the tax advantage of an RRSP relies on the assumption that you will be in a lower tax bracket when withdrawing the money in retirement than when you are contributing to it. So, if you earn less than $50,000, it makes more sense from a tax perspective to invest the money in a TFSA. If you earn more than $50,000 and are investing solely in your retirement (and perhaps saving for a home or planning more education), an RRSP makes more sense. Or, if you have enough money to spread around, consider investing in both!
MORE ABOUT RRSPs:
- Is an RRSP loan a good idea?
- How to get a bigger benefit from your RRSP contribution
- What’s my RRSP contribution limit?
- “Is it smart to hold a single exchange-traded fund in our RRSPs?”
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