Self Directed Savings Plans

Self Directed Savings Plans

RRSP

A Self-directed RRSP is an RRSP account that allows you to hold many different types of investments under consolidated within one single account. Some RRSP accounts only allow you to buy GIC’s and mutual funds. Self-directed RRSPs give you more investment freedom and control.

A Registered Retirement Savings Plan (RRSP) is a personal savings plan registered with the Canadian federal government allowing you to save for the future on a tax-sheltered basis.

What makes an RRSP special is that your contributions to it are tax deductible and your portfolio grows tax sheltered. If you are under 72 years of age and earn income, we encourage you to take advantage of the benefits an RRSP can offer.

-Taxable deferred Growth
-Tax Credit on reduction of income

RRIF

You can think of a Registered Retirement Income Fund (RRIF) as an extension of your Registered Retirement Savings Plan (RRSP). Your RRSP is used to save for your retirement while a RRIF is used to withdraw income during your retirement.

RRIFs are similar to RRSPs in several respects. Each allows for tax–deferred growth, offers several investment options and are government regulated.

A major difference between an RRSP and a RRIF is that with an RRSP, you can make annual contributions as long as you have earned income and contribution room available. Withdrawals are optional and will be taxed. With a RRIF, contributions are not allowed and you must make minimum mandatory withdrawals each year.

 

Investments held inside a RRIF grow in a tax-deferred manner just as with a RRSP. There are two primary differences between a RRSP and a RRIF. The first is that no further contributions can be made once conversion to a RRIF has occurred. The other is a special functionality called a minimum RRIF withdrawal.

A minimum RRIF withdrawal is an annual obligatory amount which is cashed out of a RRIF and sent to the account-holder without withholding tax. The withdrawal remains taxable Canadian income, but is eligible for a tax credit to reduce federal income tax by 15% of the first $2,000 withdrawn, if the holder is 65 years or older. In most provinces, a tax credit is also available to reduce provincial income tax.[1]

(Table for RRIF withdrawal)

RESP

A Registered Education Savings Plan, or RESP, is a government-registered savings plan that helps you save for a child’s post-secondary education. And the federal government can add to your savings with education grants.

Plus, your savings grow tax-deferred until withdrawn. When the student withdraws the investment income and grants for educational purposes, the withdrawals are taxed in the student’s hands, typically at a lower rate.

  1. Your savings grow tax free. There is no tax on the investment earnings, as long as they stay in the plan.
  2. If you save for a child age 17 and under, the federal government also puts money into the RESP as a grant or bond. In some provinces, the provincial government may contribute too.
  3. You can usually put money in whenever you want, up to a lifetime maximum of $50,000 per child. But some plans require set monthly or annual contributions.
  4. The contributions are not tax deductible. But you can withdraw them tax free from the plan at any time for any reason.
  5. There is a wide range of investment options available for RESPs. Examples: stocks,bondsmutual fundsGICs. Self Directed plans let you decide how to invest your savings.
  6. Your child can take money out of the RESP when they enrol in university or college or another qualifying education programor specified education program.

 

With an Education Savings Plan, you’re eligible to receive the Canadian Education Savings Grant (CESG) which matches 20% of annual contributions up to a maximum of $500 per year and $7,200 lifetime limit per child.

The Registered Education Savings Plan (RESP) is a tax-sheltered plan that can help you save for a child’s post-secondary education. With the high cost of education, many parents, grandparents and other family and friends are recognizing the need to save well before the expenses become a reality.

An RESP combines flexibility, tax-deferred investment growth and direct government assistance to help you reach your education savings goals for your children.