Savings accounts can play a crucial role in your financial plans and meeting your investment goals. Make sure you understand the different types of accounts, their rules around contributions and withdrawals, and if they’re a good fit for your financial plan. Ask questions and take the time to fully understand the various options before opening an account or making investments.
A registered investment adviser can answer questions and help you choose the savings accounts and investments that are right for you.
Registered Retirement Savings Plan (RRSP)
A Registered Retirement Savings Plan is an account registered with the federal government that you can use to save for retirement or other financial goals. RRSPs offer special tax advantages, like the ability to deduct your RRSP contributions from your taxable income each year and sheltering your investments from tax as long as it stays in the plan. An RRSP is not an investment product or fund, but instead is an account that can hold cash, GICs, bonds, mutual funds, ETFs, stocks and other qualified investments. Learn more.
Tax-Free Savings Account (TFSA)
Tax-Free Savings Accounts let you save tax-free to reach any financial goal (home, car, vacation, retirement, etc.). Your contributions are not tax deductable for income purposes, but contributions and income earned in the account are generally tax-free, even when withdrawn. TFSAs are available to Canadians aged 18+ who have a valid social insurance number and have an annual contribution limit, however if you don’t contribute the full amount each year, you can carry forward unused amounts. You can hold a wide range of qualified investments in a TFSA, including cash, GICs, bonds, stocks, and mutual funds. Learn more.
Registered Retirement Income Fund (RRIF)
A Registered Retirement Income Fund is an account registered with the federal government that holds funds you had previously put into your RRSP or other approved registered plan. An RRIF must be opened by the end of the year when you turn 71 and pays a yearly minimum amount. You can withdraw more, but not less than this minimum annual amount. Earnings are tax-free, and withdrawals are taxable. You can’t make new contributions to an RRIF, however you can invest the money paid out each year in GICs, mutual funds, ETFs, segregated funds, stocks and bonds to continue growing your retirement savings. Learn more.
Registered Education Savings Plan (RESP)
Registered Education Savings Plans help you save for your child’s post-secondary education by deferring tax while in the plan and offering government grant contributions to help grow your savings faster. When your child enrolls in post-secondary education, there are two types of withdrawals they can start taking. Each are taxed differently, and you can choose which type of withdrawal you want to make. Educational assistance payments (EAPs) are made up of the investment earnings and government grant money in the RESP. Contribution withdrawals are made up of the money you contributed to the plan. Your contributions to the plan are not tax deductible, but can be withdrawn tax-free (like a TFSA). The EAPs are included in the students income when they withdraw them (like an RRSP). But, because students generally have a lower income and are in a low tax bracket, the amount of tax they will pay will be minimum. RESPs can hold a range of investments, including cash, stocks, bonds, mutual funds and GICs. Learn more.
Registered Disability Savings Plan (RDSP)
A Registered Disability Savings Plan is intended to help parents and others save for the financial future of a person eligible for the disability tax credit. Government grants also add to your savings, and your investments grow tax-free as long as the funds stay in the plan. Withdraws of contribution amounts are not included as income for tax purposes, but grants, income earned in the plan, and proceeds from any rollovers are. RDSP savings can be held in various investments, depending on where the plan is opened, including savings accounts, GICs, stocks, bonds, and mutual funds and contributions can be made. Learn more.