There are four types of RRSPs:
- Individual RRSP
- Spousal RRSP
- Group RRSP
- Self-directed RRSP
REER individuel
Individual RRSP
Retirement plan registered in the name of the contributor. The investments and their related tax advantages belong to the contributor.
Consult the Notice of Assessment Canada Revenue Agency (CRA) sends you every year to find out the maximum amount you can deduct in your tax return.
- No minimum age to contribute.
- Possible over-contribution of $2,000 as of 18 years of age.
Spousal RRSP
Plan registered in your spouse’s name and to which you are contributing. As the contributor, you qualify for a tax deduction, but the RRSP investment belongs to your spouse.
The total amount contributed to your RRSP and to your spouse’s RRSP should not exceed the total deduction to which you are allowed.
If your spouse withdraws from his or her RRSP in the first 3 years following the deposit, the amount withdrawn will be added to your taxable income of that same year. After that 3-year period, your spouse will be taxed on any amount withdrawn from his or her RRSP.
- Advantageous if your spouse’s retirement income is expected to be lower than yours.
- Minimizes the couple’s tax exposure.
- Contributions can be made until your spouse reaches 71 years of age.
Group RRSP
Regular deposit savings plan that allows employees of a company to build capital for retirement through regular salary deductions.
A group RRSP is considered to be a collection of individual RRSPs, since an individual contract is registered for each participating employee. Certain conditions regarding eligibility and funds withdrawal apply.
If you have a group RRSP and an individual RRSP, the total amount contributed should not exceed the maximum amount indicated in your Notice of Assessment sent by the CRA (Canada Revenue Agency).
This savings method requires your employer first be registered for the Group RRSP service offer.
- Optional: you choose whether or not you participate.
- You determine the amount and choose the type of investment that’s best suited for you.
- Immediate tax savings since your contributions are deducted from your taxable income right away.
Talk to your employer about it!
Self-directed RRSP
An RRSP is self-directed if you establish and manage your securities portfolio yourself, or with the help of a broker.
For those who wish to invest their RRSP contributions in shares, not in equity funds.
Because of the administrative service charges, if the investments you choose are term savings or investment funds exclusively, perhaps the self-directed RRSP is not the best solution for you.
When a self-directed RRSP acquires or has non-eligible investments, you could be subject to a special 1% tax calculated at the end of each month on the market value of those non-eligible investments.
FAQs
Group RRSPs and TFSAs work the same way as individual plans. The main difference is you contribute to your plan through payroll deductions. There may be matched contributions, depending on the plan. You and your employer can contribute to the Group RRSP depending on the plan.
What is the difference between a group RRSP and a regular RRSP? ›
Group RRSPs and TFSAs work the same way as individual plans. The main difference is you contribute to your plan through payroll deductions. There may be matched contributions, depending on the plan. You and your employer can contribute to the Group RRSP depending on the plan.
What is the difference between a DC plan and a group RRSP? ›
If your company pension plan is a DCPP, it's similar to an RRSP, except the RRSP has these benefits: You choose the financial institution and type of plan to save with. You can make taxable withdrawals at any time with no penalty. You can contribute to your spouse's RRSP and vice versa.
Which RRSP is the best? ›
Summary of our picks for the best RRSP HISA
- Tangerine RSP Savings Account.
- WealthONE RRSP Savings Account.
- Achieva Financial RRSP Savings Account.
- Steinbach Credit Union RRSP Variable Savings.
- MAXA Financial RRSP Savings.
- Outlook Financial RRSP High-Interest Savings Account.
- EQ Bank RSP Savings Account.
The type of investment in each account is restricted to the options offered by the holder. And if you a looking for a number of different investments from different issuers, you will have many RRSP accounts. A self-directed RRSP allows you to hold a wide range of investments in one account.
What are the 2 types of RRSP? ›
There are a number of RRSP types, but generally, they are set up by one or two associated people (usually individuals or spouses).
- An Individual RRSP is set up by a single person who is both the account holder and the contributor.
- A Spousal RRSP provides benefits for one spouse and also a tax benefit for both spouses.
Make your money go further, faster—learn the benefits of your group RRSP. The money you put in can lower the tax you have to pay when you file your return. You don't pay tax on growth in the plan until you take it out. Use your contribution room when your income is higher to help lower your taxable income.
Who should not invest in RRSP? ›
If you make roughly $100,000 or less
Ms. Hasan says anyone making under $50,000 should focus on their TFSA or FHSA, since the tax deferral benefits for the RRSP are quite small if you're in a lower income tax bracket.
Is there a better option than RRSP? ›
If you have already maximized your RRSP contributions, then a TFSA may be an option for you to save more money and get the benefits of tax-free growth and withdrawals.
What is the best way to withdraw money from RRSP? ›
Withdrawing from your RRSP when you retire
- Convert your RRSP to a RRIF.
- Buy an annuity with your RRSP funds.
- You pay a withholding tax.
- The amount you withdraw is taxable income.
- Home Buyers' Plan (HBP)
- Lifelong Learning Plan (LLP) + read full definition.
You can make a withdrawal from your RRSP any time1 as long as your funds are not in a locked-in plan. The withdrawal, however, is subject to withholding tax and the amount also needs to be included as income when filing your taxes. There are situations in which tax-deferred withdrawals can be made from your RRSP.
How do I choose a RRSP? ›
Your financial institution will advise you on the types of RRSP and the investments they can contain. You may want to set up a self-directed RRSP if you prefer to build and manage your own investment portfolio by buying and selling a variety of different types of investments.
Can a group RRSP be transferred to a regular RRSP? ›
You can move money from your Group RRSP account into an individual RRSP account through the desktop or web application. Follow the steps listed in this move your money help article.
Can I use my group RRSP to buy a house in Canada? ›
It's allowed but watch the taxes.
Chances are you've heard someone talk about withdrawing money from their RRSP to buy a home. This is a pretty common practice and unless you have an employer-controlled RRSP, the money is usually yours to withdraw.
Do group RRSP contributions count towards RRSP? ›
The annual RRSP limit the CRA has set for 2022 is $29,210. The limit the CRA has set for 2023 is $30,780. These limits apply to all RRSP accounts combined. If your employer contributes to your group RRSP, their contribution counts towards your total contribution limit.
Can I withdraw money from group RRSP? ›
You can make a withdrawal from your RRSP any time1 as long as your funds are not in a locked-in plan. The withdrawal, however, is subject to withholding tax and the amount also needs to be included as income when filing your taxes. There are situations in which tax-deferred withdrawals can be made from your RRSP.
