What is a registered savings plan and how can it help you?

A registered savings plan is a type of bank or investment account that is registered with the Canadian government and offers special benefits such as tax sheltering. Registered plans can hold a range of investments such as mutual funds, ETFs, stocks and bonds.

Registered plans give you an extra incentive to save money, which helps you reach your long-term financial goals.

The Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA) are two of the most common types of registered plans.

Registered Retirement Savings Plan (RRSP)

An RRSP is a personal savings plan that allows you to save money (up to a certain amount annually) without paying income tax on the amount you put into it. As your investment grows, you do not pay income taxes on your gains until you withdraw your money.

RRSPs also offer unique features such as the Home Buyers’ Plan (HBP), which enables first-time home buyers to withdraw funds from their RRSPs to buy a home. Spouses can contribute to each other’s RRSPs to get the maximum tax benefit.

Tax-Free Savings Account (TFSA)

A TFSA helps you save money by allowing you to earn tax-free investment income and capital gains on money you have contributed. Each year, the government sets out an amount that you can deposit for that year. Unlike an RRSP, your deposits are made using after tax income, but you never pay tax on the money your investment makes.

The Government of Canada has useful information about how RRSPs and TFSAs work and their associated contribution limits and deadlines.

Other Registered Plans

Examples of other registered plans include:

  • The Registered Retirement Income Fund (RRIF), which allows you to convert your RRSP into retirement income, and
  • The Registered Education Savings Plan (RESP), which helps you save for a child’s post-secondary education.

If you are ready to open a registered account and start saving, visit your bank or contact your investment advisor.