New Year, new you, right? This is the time of year we set lofty goals for ourselves and, perhaps, one of those may be to save more money. Maybe this year will be the year you finally open one of those registered retirement savings plan your parents keep talking about. One problem: You may have no idea what they even are.
Not to worry. We’ve got you covered with some of the best RRSP savings accounts in Canada.
Read on to learn how these nifty savings vehicles can help you achieve your financial goals.
What is an RRSP?
First, though, let’s get into what exactly an RRSP is.
A registered retirement savings plan (RRSP) is a government-approved account that allows Canadians to plan for retirement. First introduced in 1957, RRSPs provide a way for individuals to save and invest their money in a tax-efficient manner. Annual contributions to an RRSP can be used as a tax deduction, which reduces the amount of tax a person will pay on their income. In addition, all capital gains and dividends aren’t taxed as long as the money remains in the RRSP.
RRSPs can be opened by any Canadian over the age of 18, so they’re perfect for any adult hoping to save money in a tax-sheltered account. One thing to keep in mind, though, is that RRSPs have contribution limits and deadlines:
- The RRSP contribution limit for 2019 is $26,500 (however, unused contribution room from previous years carries over).
- The RRSP deadline for 2018’s taxable year is March 1, 2019.
Main RRSP benefits
RRSPs offer three major benefits.
The first is that you get a tax deduction – contributing to your RRSP account lowers your taxable income, which reduces the amount of tax you have to pay. It can also put you in a lower tax bracket. For many, this means a sizeable tax return come Spring.
The second is that the money inside your RRSP grows tax-free. All capital gains, dividends, and interest made within the account won’t be taxed.
Finally, RRSPs allow you to defer taxes. Money held in an RRSP (both the contributions and investment gains) won’t be tax-free forever. You’ll pay tax on the money when you withdraw it, presumably at retirement. However, for most people their marginal tax rate will be lower in retirement, so by deferring the tax until you’re older you will end up paying less.
The best RRSP savings accounts in Canada
Many RRSP accounts allow you to hold various types of investments within them; from ETFs, bonds, and stocks, to gold, mutual funds, cash, and many others.
A simpler version, though, is an RRSP savings account – which offer the tax benefits of an RRSP and the guaranteed interest rates of high-interest savings accounts.
These are some of the best RRSP savings accounts currently offered.
Implicity Financial RRSP savings account
- Implicity’s RRSP savings account requires no minimum balance and offers an interest rate of 2.4%.
- Implicity is an online financial institution that guarantees 100% of its deposits. It’s a division of Entegra Credit Union, a Manitoba-based credit union that has over 15,000 members.
- Note that their services are only offered in English.
Alterna Bank RRSP eSavings account
- Alterna’s RRSP savings account boasts an interest rate of 2.35% and requires no minimum balance or fees.
- Deposits are also insured up to the maximum amount through the Canada Deposit Insurance Corporation (CDIC)
- Alterna is a subsidiary of Ottawa-based credit union Alterna Savings. Their accounts are available to all Canadians.
Meridian Good to Grow high-interest savings account
- Merdian’s HISA can be registered as either a TFSA or RRSP.
- New accounts are eligible for 3.25% interest for the first four months and 1.5% thereafter.
Tangerine RSP savings account
- Similar to Meridian’s account, Tangerine’s offers a promotional rate that reverts to a lower rate eventually.
- New Tangerine RRSP savings account clients can save 3% for the first six months and 1.25% thereafter.
- The account requires no minimum balance and costs $0 fees.
- The Best TFSA Savings Accounts in Canada
- Your Top RRSP Questions Answered
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