Registered Plans

Welcome back!

If you aren't in the banking or financial services industry, you may feel overwhelmed by the different types of accounts or registered plans that are available to you – or you may not be aware of some of them at all!  

In Canada, there are several types of registered accounts that offer various benefits to individuals looking to manage their finances effectively and make the most of their savings. These accounts are designed to help Canadians save for specific financial goals and offer tax advantages.  

I've highlighted some of the most popular registered plans offered today, with some high-level information including their benefits below for you to scroll through and learn more!

Registered Retirement Savings Plan (RRSP): 

A Registered Retirement Savings Plan (RRSP) is a savings plan, registered with the Canadian federal government that you can contribute to for retirement purposes. When you contribute money to a RRSP, your funds are "tax-advantaged", meaning that they're exempt from being taxed in the year you make the contribution.

Any investment income earned from investments held within the RRSP can then grow tax-deferred, as long as the money remains within the RRSP, until it's withdrawn. RRSP contributions are tax-deductible, meaning that they can be deducted on your current year tax return, potentially reducing the total amount of taxes you pay. 

Adam's Insight: There are two qualifying transactions which would allow you to withdraw from your RRSP tax-free, with exceptions: 

The Home Buyers' Plan (HBP): This plan is a program that allows you to withdraw from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a specified disabled person. Currently the HBP withdrawal limit is $35,000. You have up to 15 years to repay to your RRSP, pooled registered pension plan (PRPP) or specified pension plan (SPP) the amounts you withdrew from your RRSP under the Home Buyers' Plan (HBP). Your repayment period starts the second year after the year when you first made your first withdrawal from your RRSPs under the HBP. For example, if you made your first withdrawal in 2024, your first year of repayment will be 2026. You can repay the full amount into your RRSPs, PRPPs, or SPP at any time. Learn more with the Government of Canada.

 The Life Long Learning Plan (LLP): allows you to withdraw amounts from your registered retirement savings plans (RRSPs) to finance training or education for you or your spouse or common-law partner. You do not have to include the withdrawn amounts in your income, and the RRSP issuer will not withhold tax on these amounts. Over your repayment period (generally 10 years), you have to repay to your RRSP, PRPP or SPP, the amounts you withdrew under the LLP. Any amount that you do not repay when due will be included in your income for the year it was due. Learn more with the Government of Canada.

Tax-Free Savings Account (TFSA): 

A TFSA (Tax-Free Savings Account) is a registered savings plan that lets you grow and withdraw your money, tax-free, making it a great option when saving for short and long-term goals.  

Adam's Insights: A TFSA is not just a savings account. Your TFSA can hold a variety of qualified investments, including cash, stocks, guaranteed investment certificates (GIC's) and mutual funds. Learn more with TD.

Registered Education Savings Plan (RESP): 

A Registered Education Savings Plan (RESP) is an account that can help you save for your child's education. It is a regulated account that can be used to pay off post-secondary education related expenses or tuition. Learn more with Government of Canada.

Adam's Insights:  You contribute money into your child’s RESP. The government will then contribute an additional 20% on the first $2,500 contributed annually, up to a maximum of $500 a year. That can add up to $7,200 over the lifetime of your RESP, per child, in grant money through the Canada Education Savings Grant (CESG). You may also be eligible for the Canada Learning Bond (CLB) and additional provincial grants. Learn more with TD.

Registered Disability Savings Plan (RDSP): 

A registered disability savings plan (RDSP) is a savings plan intended to help an individual who is approved to receive the disability tax credit (DTC) to save for their long-term financial security. 

Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59. Contributions that are withdrawn are not included as income to the beneficiary when paid out of an RDSP. However, the Canada disability savings grant (grant), the Canada disability savings bond (bond), investment income earned in the plan, and the proceeds from rollovers are included in the beneficiary's income for tax purposes when paid out of the RDSP. Learn more with the Government of Canada.

Adams Insights: According to TD, Your Registered Disability Savings Plan (RDSP) is eligible to receive government assistance through two financial programs, which can really help your savings grow faster. 

Canada Disability Savings Grant (CDSG):  

An RDSP is eligible for the Canada Disability Savings Grant (CDSG). Depending on your family’s net income and the amount contributed, there are benefits from matching grants of 100%, 200% or 300% — up to a lifetime limit of $70,000 (as shown in the chart below). Grants will be paid into an RDSP up to the end of the year in which the beneficiary turns 49. 

Canada Disability Savings Bond (CDSB):  

An RDSP is eligible for the Canada Disability Savings Bond. According to the Government of Canada, The bond is an amount paid by the Government of Canada directly into an RDSP. The government will pay a bond of up to $1,000 a year to low-income Canadians with disabilities. No contributions have to be made to get the bond. The lifetime bond limit is $20,000. A bond can be paid into an RDSP until the year in which the beneficiary turns 49. 

Registered Pension Plan (RPP): 

Registered Pension Plans are generally offered by employers and are of two types – Defined Benefit (DB) and Defined Contribution (DC). DB plans promise to pay a set pension amount based on factors like age, years of service and earnings history. DC plans, on the other hand, provide pension benefits based solely on contributions and investment earnings. Contributions made by your employer to your RPP may also impact your RRSP contribution limit. Learn more with TD.

Adam's Insights: Check with your employer or HR department to find out what employer sponsored savings or matching plans are offered, if any. These can be great ways to increase your savings and investments with the help of your employer.  

 First Home Savings Account (FHSA): 

The First Home Savings Account (FHSA) is a type of registered savings plan introduced by the federal government in 2022. An FHSA is designed to help you save for your first home, tax-free and help you reach your vision of owning a home faster!  

An FHSA combines some of the features of an RRSP and TFSA. Contributions will generally be tax-deductible, and when a qualifying withdrawal is made, the amount withdrawn is not-taxable. 

• Annual contributions are capped at $8,000 up to a $40,000 lifetime contribution limit. 
• A maximum of $8,000 unused contribution room can carry forward to the following year. 
• The account can stay open for a maximum 15 years or until the end of the year you turn 71 

Adam's Insights: Funds in the account grow tax-free, which could mean more money for a qualifying home purchase. You may also be able to transfer funds tax-free from your FHSA to an RRSP or RRIF in your name. 

 Learn more about the FHSA with TD.

All of the plans discussed above have varying qualification criteria, advantages, tax benefits and consequences in which each individual needs to be aware of prior to opening. Consult a financial professional and/or an Accountant to determine what is best for your personal circumstances. 

Did you learn anything new with regards to Canadian Registered Plans? Let me know what you find most interesting or want more information about below!