Registered Retirement Savings Plans: Everything You Need to Know About RRSPs

Registered Retirement Savings Plans: Everything You Need to Know About RRSPs

The deadline to contribute to a Registered Retirement Savings Plan (RRSP) is March 1, 2018. As you think about your investments before the deadline, it helps to look at how your portfolio performed over the last year.

This is also the perfect time to take a look at your investment fees. Simply put, investments come with fees. It’s important for investors to understand the fees they are paying and how those fees can impact their investment returns over time. A deeper understanding can lead to a more informed conversation with your registered investment advisor.

Meeting with Your Registered Investment Advisor

Recent changes to securities regulations mean that your registered investment advisor must now annually provide you with a statement that gives detailed information showing the fees and charges paid each year for the services and advice you’ve received.

Your statement will include a Charges and Compensation Report.  The statement should arrive in the mail or online right about now and provides a good opportunity for you to meet with your investment advisor to go over this important information.

We have more information on registered investment advisors in the Know Your Advisor section of our website.

Take a Look at Your Investment Fees

The RRSP deadline is right around the corner, do you know how much you’re paying to invest your money?

According to a new poll commissioned by the British Columbia Securities Commission (BCSC), over a third of British Columbians are anxious about their investments.

This year, we’re showing investors how fees affect their investments over time through a campaign called Take a Look at Your Investment Fees. The campaign illustrates how a one percent difference in fees can lead to a large difference in returns.

Take a look at our investment fee calculator to find out what your returns look like.

Investors who want to test their investment fee knowledge can take the investment fee quiz. We also have a free fee guide that breaks down fees in an easily digestible way.

Download the free fee guide

The Basics of RRSPs

Yes, RRSP season is a great time to look at your investment fees and meet with a registered investment advisor. But what is an RRSP? What are the need-to-knows about this type of account?

An RRSP is an account, registered with the Canada Revenue Agency (CRA), which allows you to shelter investment earnings and defer taxes until you begin to make withdrawals in your retirement years.

There are a few things to keep in mind whether you’re opening an RRSP, contributing to one, withdrawing funds, or closing an account.

If you’re opening an RRSP, keep in mind there are two different types of RRSP accounts: individual or spousal. Spousal RRSPs are different from regular RRSPs because they allow one spouse to contribute to the account in the name of the other while keeping the tax benefit.

Employers may also provide Group RRSPs as a benefit. Speak with your registered investment advisor about the differences between accounts.

If you’re contributing to an RRSP, the contribution deadline is 60 days after the end of the calendar year. In 2018, it’s March 1. The Canada Revenue Agency puts limits on what you can contribute to your RRSP each year.

In terms of withdrawing funds, there are tax consequences for taking money out of your RRSP before you retire. You will also lose the contribution room you used when you put the money into the account. If you need to borrow money from your RRSP to go to school or purchase a home, you can avoid tax consequences if you pay the money back within a specific amount of time.

If you’re closing your RRSP, you must do so by the end of the calendar year in which you turn 71. Once the account is closed, you can either take your funds as cash or convert your savings into a stream of income. Income streams include a Registered Retirement Income Funds (RRIFs) or an annuity.

What Types of Investments Can You Put in Your RRSP?

An RRSP holds many types of investments; some of them include:

  • GICs
  • Individual stocks
  • treasury bills (t-bills)
  • bonds (including government bonds, corporate bonds, and strip bonds)
  • mutual funds (only RRSP-eligible ones)
  • ETFs

If you have any other questions about RRSPs, visit the RRSP section of InvestRight.org or speak with a registered investment advisor.

Learn more about RRSPs

If you have any concerns about a person or company offering an investment opportunity, please contact BCSC Inquiries at 604-899-6854 or 1-800-373-6393 or through e-mail at [email protected] You can also file a complaint or submit a tip anonymously using BCSC’s online complaint form.

InvestRight.org is the British Columbia Securities Commission’s investor education website. Subscribe to receive email updates from BCSC InvestRight.