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The best overall savings accounts in Canada
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Simplii Financial ™6.00%
Earn 6% interest for 5 months on your first Simplii Financial High Interest Savings Account. Limits apply. Offer ends April 30, 2024.get this rate
No monthly or annual feesget this rate
Oaken Financial Savings Accountget this rate
What bank offers the best RRSP?
When it comes to the best RRSP for your money, our best bet (and reigning champion for the past 2 years) is the online-only EQ Bank.
EQ Bank’s Retirement Savings Plan Account leads the pack with the highest standard interest rate for 2024, giving you the most long-term bang for your buck when it comes to growing your money. Plus, it comes packed with other perks, including:
- CDIC insured, ensuring that your money is safe and protected by the Government of Canada
- No monthly fees
- Simple account linking for automated contributions
- Easy to use and no-hassle online portal
Check out Ratehub's Personal Finance Award winners for 2023 to see our opinion of the best accounts on the market today.
What is the RRSP contribution limit?
An RRSP Contribution Limit is the maximum amount you can contribute to your RRSP in one year.
The contribution limit in 2024 equals a maximum of $31,560. The good news: unused contribution room from your previous years will carry over (you can quickly check your total personal contribution limit online by logging into your CRA account).
What is the RRSP deadline?
The RRSP deadline marks the last day a person can contribute to an RRSP and receive tax-benefits for that previous year. The RRSP deadline for the 2023 calendar year is Feb 29, 2024.
Do RRSPs reduce your taxable income?
Yes, RRSP contributions reduce your net taxable income. Annual RRSP contributions can help Canadians save for retirement but are also tax deductible. Contributions can be deducted from taxable income when filing your tax return, meaning you can end up paying less taxes.
How do RRSP withdrawals work?
Unlike a TFSA, an RRSP doesn’t offer tax-free withdrawals at any time and there are quite a few RRSP withdrawal rules everyone should know about.
An early withdrawal from an RRSP is taxed like regular income, at the same rate as your tax bracket. This is known as RRSP Withholding Tax. The idea being you should wait to withdraw your RRSP until retirement, when you’re in a significantly lower tax bracket and can maximize your tax savings.
An RRSP legally matures on December 31st in the year you turn 71 years old, and your funds can be accessed in one (or a combination of) the following ways:
- Withdraw your funds in cash
- Convert your RRSP to a Registered Regiment Income Fund (RRIF) and make minimum withdrawals each year
- Use funds to purchase an annuity (offers guaranteed income for a set period of time)
All that said, there are government initiatives that allow you to withdraw certain amounts from your RRSP early before retirement with no penalties - like if you plan to use your funds to buy your first home (Home Buyers' Plan) or advance your education (Lifelong Learning Plan).
Can I withdraw my RRSP before retirement?
As covered above, withdrawing your RRSP early before retirement can have costly tax implications - with two notable exceptions. The Home Buyers Plan and the Lifelong Learning Plan. However, these withdrawals are considered to be loans and must be contributed back into your RRSP over a specific period.
Is an RRSP worth it?
RRSPs offer tax advantages - from tax deferment to reducing your taxable income - that’ll benefit almost all Canadians when savings or investing for future retirement. Aspiring first-time home buyers and those looking to pursue full-time career training or an advanced education are also poised to benefit greatly by funding an RRSP thanks to the Home Buyers’ Plan and Lifelong Learning Plan, which both allow for early, penalty-free withdrawals from your RRSP.
In certain cases, though, choosing a TFSA over an RRSP may be the better alternative. For instance, if you’re saving for short-or-medium term financial goals (like, say, a wedding, a new car, or a house renovation), a TFSA could be more beneficial as it allows for tax-free withdrawals at any time and for any reason. TFSAs may also be the better option if you’re in a lower tax bracket (earning below $50,000) or just starting your career with potential for income growth in the future; the reason being you might not be in the position to benefit as much from the tax deduction advantages offers by an RRSP.
What is a Registered Retirement Savings Plan (RRSP)?
A Registered Retirement Savings Plan (RRSP) is a government-approved account that offers tax incentives for Canadians saving or investing towards their future retirement.
There are two key benefits to investing in an RRSP:
- Contributions made towards an RRSP are eligible for a tax deduction, reducing the amount of tax a person will pay on their income which will result in a bigger refund come tax season (e.g. if you earn $80,000 but contributed $10,000 towards your RRSP in a given year, you would be taxed as if you earned $70,000)
- The investments you hold in an RRSP are tax-deferred, which means you’ll be taxed on your RRSP holdings only when you make a withdrawal. The idea being you’ll withdraw your RRSP in the future when you hit retirement and are in a lower tax bracket
RRSPs can be opened by any Canadian resident as soon as they start working, so they’re perfect for people who want to maximize their tax savings for retirement over the course of a lifetime. One thing to keep in mind, though, is that RRSPs have contribution limits. The RRSP contribution limit for 2023 is 18% of your pre-tax income or $30,780 (whichever is lower). The good news is that unused contribution room from previous years carries over.
If you want to reap all of the benefits of an RRSP in the same year, be aware of the RRSP contribution deadline for making contributions (March 1, 2023 for the contribution year of 2022). While the amount carries over each year, making contributions before the RRSP deadline will count for that year. Otherwise, tax deductions go towards the next year.
Many people tend to think that RRSPs are limited to cash savings, but that certainly isn’t your only option.
What is the best way to invest in an RRSP?
RRSPs can hold many different types of investments, including mutual funds, stocks and cash. The interest you earn depends on the type of RRSP account and how you select your investments.
As we showed above, you can have your investments in an RRSP be fully managed by an advisor, or you could choose a self-directed plan where you make your own investment choices, typically at a lower fee. Below are some types of investments you can hold in an RRSP, many of which grow compound interest:
Can you withdraw your RRSP early before retirement?
As its namesake clearly suggests, the Registered Retirement Savings Plan is primarily designed to encourage Canadians to save and invest towards their future retirement. Taking out funds from an RRSP before retirement means you’ll get hit with withholding tax (hovering between 10%-30% depending on how much you withdraw) and permanently losing your RRSP contribution room. The amount you withdraw from your RRSP must also be reported as taxable income, which means you could potentially be on the hook for more taxes depending on your income bracket.
The good news is you can access your RRSP funds early with no tax penalty under two government-approved programs:
- The Home Buyers’ Plan (HBP): You can withdraw up to $35,000 (or $70,000 for a couple) from your RRSP to put towards a first-time home purchase
- The Lifelong Learning Plan (LLP): You can withdraw $10,000 per year (up to a total maximum of $20,000) to put towards advanced education for you, your spouse, or your common-partner. This is exclusively for advanced adult education
In both these cases, you’ll only be “borrowing” funds from your RRSP and will be expected to recontribute the amount you withdrew over the course of several years. For instance, in the case of the Home Buyers’ Plan, you must pay back what you borrowed from your RRSP over the course of 15 years (roughly $2,333 per year if you borrow the maximum amount of $35,000).
If you need funds before retirement, you can consider investing in alternative registered accounts like a TFSA (which allows you to invest and withdraw funds tax-free with virtually no restrictions) or an RESP (a registered tax-advantage account for saving towards a child’s post-secondary education).
How much can I contribute to an RRSP?
An RRSP contribution limit is the total amount of money that a Canadian can contribute to an RRSP account in one year. The annual limit for 2023 is either 18% of your pre-tax income from the previous year or $30,780 whichever is less. It’s important to note though, any unused contribution room from your previous years carries forward.
You can find your own RRSP contribution limit (including carried-over amounts) by logging onto the Canada Revenue Agency website (CRA).
Want to maximize your RRSP by investing in stocks and ETFs? Consider:
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