Types of Savings Accounts in Canada

 

Registered Retirement Savings Plans (RRSPs)

An RRSP is retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax.

One key deduction not only offers tax benefits but also helps you save systematically and prepare for retirement and other financial needs. Registered Retirement Savings Plans (RRSPs) let you put money into a registered plan and deduct the money from your taxable income until you take it out of the plan.

• Deducting your RRSP contribution from your net income means you don't have to pay income taxes on it until you take it out of the registered plan. You will pay lower taxes on the money in the plan when you take the money out if you are in a lower tax bracket at that time.
• RRSPs are designed to help you save money for your retirement. You can withdraw money from your RRSP for certain purposes, such as buying your first home and financing your education. However, you will have to pay it back within a limited period. In addition, if you take your money out of the plan for any other reason before you retire, part of the amount you take out will be withheld for taxes.

Tax-Free Savings Accounts (TFSAs) 

let you put money in a registered plan, and any income the plan earns is tax-free.

• In 2021 the maximum amount you can put in a TFSA is $6,000 a year (the maximum you could put in a TFSA in 2019 was $6,000 and in 2020 was $6,000). But if you did not contribute the maximum in previous years, you may be able to contribute more. For example, if you did not contribute in years one and two, you may contribute up to $18,000 in year three.
• You can take money out of a TFSA and put it back again in a later year.
• A TFSA does not affect the money you receive from other government sources.
• A TFSA can include almost any type of investment. Returns may be guaranteed or they may not.
• For details, go to Canada Revenue Agency's information on The Tax-Free Savings Account  
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Registered Education Savings Plans (RESPs) 

let you put money into a registered plan and shift the income the plan makes to a student.

• Shifting the income in the plan to a student usually means that the student pays little or no income tax on the money the plan earns.
• Money in an RESP is eligible for grants from the Government of Canada and the province of Quebec, so it can be a source of additional tax-free income.
• For details, go to Employment and Social Development Canada's information on the Canada Education Savings Grant (CESG).
• Quebec also has a student savings plan.
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• For details, go to Revenue Québec's information on Quebec Education Savings Incentive 
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Registered Disability Savings Plans (RDSPs) 

• let you put money into a registered plan and shift the income the plan makes to a person with a disability.
• Money in an RDSP is eligible for grants from the Government of Canada, so it can be a source of additional tax-free income.
• For details, go to Employment and Social Development Canada's information on Registered Disability Savings Plans.

Registered Retirement Income Funds (RRIFs)

A Registered Retirement Income Fund is an account registered with the federal government that holds funds you had previously put into your RRSP or other approved registered plan. An RRIF must be opened by the end of the year when you turn 71 and pays a yearly minimum amount. You can withdraw more, but not less than this minimum annual amount. Earnings are tax-free, and withdrawals are taxable. You can’t make new contributions to an RRIF, however, you can invest the money paid out each year in GICs, mutual funds, ETFs, segregated funds, stocks, and bonds to continue growing your retirement savings.