With the 2022 RRSP contribution deadline right around the corner, it’s the perfect time to revisit your retirement savings strategy. Is the money in your RRSP aligned with your retirement goals? Do you have an opportunity to save money on fees? Are you struggling to keep track of multiple RRSP accounts?
To help you find the best place for your retirement savings, I’ve compiled the following list of the best RRSP investment accounts for 2023.
A Registered Retirement Savings Plan is not an investment in and of itself. It’s a government-sponsored, tax-sheltered investment plan. Within that plan, you can place your money into various investments, such as savings accounts, GICs, stocks and bonds, ETFs, mutual funds, etc. I like to think of an RRSP as an umbrella. The investments you hold under the umbrella are tax-sheltered, whereas taxable accounts remain outside the umbrella.
With so many ways to invest, choosing the right account for your RRSP can be challenging. For example, the best places to invest in stocks and ETFs might not be ideal for savings accounts or GICs. To help you build your RRSP strategy, I’ve compiled a list of what I believe are the best accounts for various RRSP investments, starting with the RRSP savings account.
First, an RRSP savings account isn’t a long-term investment. You should only use it to park money for a short period until you decide where to invest long-term. Many people temporarily deposit money into an RRSP savings account to get their income tax receipt.
You can also use an RRSP Savings account to store money you plan to use in the near future to purchase your first home(Home Buyers Plan) or go to school (Lifelong Learning Plan). The primary objective of RRSP Savings is safety. You’ll earn a little interest, but more importantly, your principal is guaranteed.
Here are my picks for the best RRSP savings accounts in Canada. I’ve considered two things (best interest rate and Canada-wide availability). You might find an online bank or credit union offering more interest than the ones I’ve chosen; however, if they’re only available to residents of Ontario or Alberta, it’s not helpful for most Canadians.
Current Interest Rate: 3.00%
Other Features: Set up regular contributions, access your tax slips online
EQ Bank is a leading Canadian digital bank that offers no-fee banking and consistently high-interest rates on savings accounts and GIC products. They consistently rank at or near the top of our best high-interest savings account list. You can open an EQ RRSP Savings account within minutes and earn an excellent interest rate on every dollar you save. Currently, EQ is paying 3.0% interest.
Promotional Interest Rate: 5.00% for the first five months. (Standard rate is only 1.00%)
Other Features: Range of RRSP products, including GICs and low-cost investment funds
Tangerine gets my nod solely for its introductory interest rate of 5% for the first five months. After that, the rate drops to a pedestrian 1.00%. However, if you need a place to park your RRSP contribution or other funds for up to 5 months, Tangerine’s rate is even higher than EQ’s.
For ongoing savings, go with EQ.
Like savings accounts, Guaranteed Investment Certificates (GICs) are safe investments offering a principal guarantee. GICs are also considered short-term investments, with most terms ranging between 1 and 5 years.
GIC account holders benefit from a preferred interest rate (versus a savings account) in exchange for a lock-in period. While your GIC is locked in, you cannot withdraw the funds without a penalty. There are cashable GICs, but they offer lower interest rates. Here are two of the best places to open an RRSP GIC right now:
Current GIC Interest Rates (1, 3, 5-Year Terms): 5.00%, 4.90%. 4.80%
Other Features: The Deposit Guarantee Corporation of Manitoba guarantees all deposits without limit.
Achieva Financial is the digital banking arm of Winnipeg-based Cambrian Credit Union. You can open an RRSP GIC online with Achieva if you are 18 years of age or older, a permanent resident of Canada, have an active credit file, and are willing to become a Cambrian Credit Union member ($5 membership fee).
Current GIC Interest Rates (1, 3, 5-Year Terms): 5.00%, 4.30%. 4.20%
Other Features: GIC deposits are insured by the Canada Deposit Insurance Corporation (CDIC).
While EQ Bank’s three and 5-year GIC rates are lower than Achieva Financial, they match them with a 5.00% rate for one year. When you combine their excellent RRSP savings rate and their Canada-wide availability, it’s an excellent offering for short-term RRSP investors.
Picking a winner for the best place to buy mutual funds is like splitting hairs. After all, no-load mutual funds are widely available at most Canadian financial institutions. (In 2023, you should never agree to pay a sales fee to buy a mutual fund).
What We Like: No trading fees on mutual fund purchases, access to TD eSeries mutual funds.
TD Direct Investing is Canada’s largest online brokerage. But while they charge higher trading fees on stocks and ETFs than other online brokers, such as Questrade and Wealthsimple Trade, they don’t charge trading fees on mutual fund purchases. (Questrade charges a $9.95 mutual funds trading fee.)
But there’s another advantage when buying mutual funds through TD Direct Investing. You get access to the full lineup of TD eSeries mutual funds. Most online brokers don’t offer TD eSeries funds.
In my opinion, TDs eSeries funds are Canada’s best low-cost index mutual funds and the best alternative to broad market index ETFs. While I’ve long since moved a large portion of my portfolio into ETFs, I maintain a small position in TD eSeries.
Exchange-traded funds provide investors with a diversified portfolio of stocks and bonds at the lowest possible cost. You can purchase ETFs with MERs of less than 0.05%. Unfortunately, most online brokers still charge a trading fee of up to $9.95 on every ETF purchase; however, there are a few places where you can avoid trading fees.
What We Like: No account fees, free ETF purchases.
Questrade is Canada’s leading independent online broker and our top choice here at RetireHappy. Questrade offers thousands of commission-free ETFs and doesn’t charge an annual account fee on RRSP accounts.
If you’re currently employing an ETF strategy in your RRSP, but you’re paying trading fees on every purchase you make, you can transfer your account to Questrade, and they will reimburse the transfer fee up to $150 on every account you move over.
You can open a Questrade account online using our exclusive link or find out more in our full Questrade review.
Wealthsimple Trade is a mobile stock trading app from Canada’s largest robo-advisor, Wealthsimple. Like Questrade, they offer free ETF purchases in an RRSP account; however, Wealthsimple Trade isn’t for everyone.
You can only trade on your mobile device, and the app lacks the functionality and market research tools of other trading platforms. But if you don’t need the extra bells and whistles, Wealthsimple Trade is a great way to purchase ETFs on the go.
Open an account with Wealthsimple, or learn more in my full review.
Robo-advisors offer a fully hands-off approach to investing. Within minutes, you can open an account online and receive an investment recommendation from the robo-advisors automated algorithm without a human advisor. Because of the platform’s automation, you benefit from the simplicity and low fees.
I recently crowned Wealthsimple as our top robo-advisor for 2023, and that extends to their RRSP account offering. When you open a Wealthsimple RRSP, you’ll be assigned a low-cost ETF portfolio that matches your investment objective. You’ll be able to set up regular contributions from your primary bank account, and Wealthsimple will automatically rebalance your account for added peace of mind.
Even though Wealthsimple fully automated the process, you can speak with a human advisor regarding your investment strategy at any time.
Honourable mention goes to BMO Smartfolio.
Open a Wealthsimple RRSP Today
There are over a dozen online brokers in Canada, making it difficult to decide which is best for your RRSP. Every brokerage has its advantages and drawbacks. The big bank brokers offer powerful trading platforms and excellent research tools for sophisticated traders. However, they tend to have the highest trading fees, and many charge an annual fee for registered accounts, like RRSPs, RRIFs, TFSAs, etc.
Best Overall: Questrade
If you want free stock trades and don’t require as many features, Wealthsimple Trade’s mobile platform is an option. However, the best all-around is Questrade. You get free ETF purchases, a free RRSP account, and their minimum stock trading fee of $4.95 is among the lowest in Canada.
Open a Questrade RRSP account Today
Since the advent of the Tax-Free Savings Account (TFSA) in Canada, many Canadians have wondered whether it’s better to put money in their registered retirement savings plan (RRSP) or TFSA.
While RRSP contributions lower your taxable income, with a TFSA, you don’t pay any tax when you withdraw the funds, as the Canada Revenue Agency (CRA) considers TFSA contributions after-tax money.
With both accounts offering tax benefits, the best answer is that you should contribute to both plans. Higher-income earners will benefit more from the immediate tax savings benefits RRSPs offer. And if it makes sense, by contributing to a spousal RRSP, they can negate the tax consequences when they withdraw the money in retirement.
That said, everyone benefits from the flexibility of a TFSA. You can use your TFSA to save for any purpose, whether it’s retirement, a new house purchase, or your next vacation.
The RRSP contribution limit for the 2022 taxation year is 18% of your previous year’s earned income, as reported on your income tax return, up to a maximum of $29,210.
Check out our 2023 RRSP Guide for more information.
If you have the contribution room available, you can put money in an RRSP until December 31st of the year you turn 71. At that point, you must transfer your entire RRSP account balance into a RIF account. RIF accounts are tax-sheltered and designed to pay you an income for the remainder of your life. There is no minimum age to open a RIF account.
The investment accounts I’ve highlighted represent some of the best options for your RRSP right now. But they aren’t the only options, and with interest rates and account features constantly changing, the best account today may not be tomorrow.
When it comes to your retirement, the most important thing you can do is ensure that your investments align with your long-term objectives and risk tolerance. You also need to make sure you’re setting aside enough money to meet your retirement goals.
Colin Graves is the Managing Editor at Retire Happy. With more than 24 years of experience with a Big Five financial institution, he was responsible for managing books of business in excess of $1 billion and held a financial planning designation.
Peoples Group currently offers a 5.1% & up to 5.4% for a 2 year GIC rate for reg. & non-reg. accounts.
Trading on a desktop computer with Wealthsimple is also possible (not restricted to the mobile app).
I’m currently paying BMO $1,000 a year in mgmt fees on my $110,000 RRSP. I’d like to explore other cheaper options. Any suggestions? Will I be charged a transfer fee?
Some discount brokerages such as Questrade will pay up to $150 per account to cover transfer fees from another institution. Questrade will also arrange the transfer for you. Check out what is being offered.
But take note that if you do not want to actively manage your portfolio, even Questwealth portfolios, which invest only in ETFs, will charge at least $340 per year on a $110,000 portfolio (assuming 0.20% management + 0.11% portfolio MER fees due to ETFs held).
Each institution sets its own rules for what can be held inside their registered accounts.
For example at RBC one can not have a “redeemable” GIC or significant interest-bearing Savings Account inside a registered account. A “branch” registered account allows Mutual Funds, non-redeemable GICs, and a cash account with 0.1% or less interest. A “RBC Direct Investing” registered account allows mainly stocks and a cash account with no interest.
There are ETFs that can act as a substitute for interest-bearing savings accounts and can be held inside most registered accounts at most brokerages. One example is the recently introduced Horizons High Interest Savings ETF (CASH.TO). It puts its funds in the high interest savings accounts of the top 6 Canadian Banks at institutional savings rates and currently yields about 5%. Since ETFs can be bought and sold quickly it can make sense to temporarily park money in CASH.TO until an investment opportunity presents itself.
BTW: Questrade does not charge to purchase ETFs. But has a minimum $4.95 fee to sell.
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