Four common types of RRSPs

Four common types of RRSPs

With any of these plans, you have the option of paying for the help of a professional adviser. An adviser can help guide you to choose investments that are right for you.

1. A basic RRSP
   
   • For people who want a simple account in their own name
   • Available at a bank or other financial institution
   • Offers a smaller range of investment choices, with some advice from the staff
   • You may or may not pay fees for the plan; investment costs are extra and may include commissions and other charges.
2. A self-directed RRSP
   
   • For people who feel they know enough to choose their own investments
   • Available at a brokerage firm
   • Offers a wider range of investment choices, without advice
   • You pay the costs of the plan and investment costs.
   • Learn more about self-directed RRSPs.
3. A group RRSP at work
   
   • For people who have this option at their workplace
   • Each member of the group has their own RRSP, but they are all looked after by the same life insurance company, bank or mutual fund company
   • May offer a range of investment choices
   • The money you put into the plan is often taken out of your pay; your employer may add to your savings
   • Your employer pays the costs of the plan; you pay investment costs.
   
   Note that if your employer does pay into your RRSP account, there may be policies that make it hard for you to take the money out before you retire. Before deciding to join a Group RRSP, find out how it works, what you can invest in, and what fees you may have to pay. Also, find out how much your employer will put in, and ask about any rules for when and how you can get your money from the plan.
   
   Tip: When you get a new job, it’s a good idea to check your employee benefits and see if you can join a group RRSP plan.
4. Spousal or partner RRSP
   
   • For people who want to contribute money to their spouse or partner’s RRSP to balance their incomes and reduce taxes at retirement
   • The person who contributes gets the tax break
   • To qualify you must have lived together as a couple for at least 12 months, have a child together by birth or adoption, or share custody and support of your partner’s children from a previous  relationship.

Note that the money you contribute to a spousal RRSP belongs to your spouse or partner. If a couple breaks up, family law generally requires spouses to divide assets equally. This is not the case for common-law partners. You might consider drafting a joint agreement to cover this.

Tip: If for some reason you and your spouse need some of your RRSP money before you retire, you may have to pay tax when you take the money out. Having a spousal RRSP gives you the option of taking the money from the RRSP that is in the name of the lower-earning spouse. That way, you will have a lower tax bill.

Remember: A basic RRSP is not the only choice.
Make sure you choose the kind of plan that fits your personal situation and the way you like to invest your savings.