Ep. 11 Understanding Registered Accounts

Living Richer

Mar 10 2021 • 27 mins

With so many different types of accounts and confusing acronyms, trying to navigate the maze of account options and create a strategy that makes sense for you can be overwhelming. In today’s show we’re going to put an end to that.

For the most part, in Canada all accounts are divided into two categories -- registered or non-registered. The major difference is that government-registered plans and accounts let you grow your savings tax-sheltered. Non-registered investment accounts like cash accounts don’t.

In this episode we’re going to focus in on the major types of registered accounts as opposed to non-registered. These will include different types of RRSPs and RRIF’s, Tax-Free Savings Account (TFSA) and Registered Education Savings Plans (RESP).

You’ll learn what these plans are, how they work and who they benefit. I’ll also let you in on some key benefits you may not be aware of and little-known tips on how to make them work even harder for you.

Below are my four biggest takeaways from today’s podcast:

  • In my opinion, the most ideal situation would be one in which an investor owns both registered and non-registered accounts. This allows you to max out your registered accounts - RRSP, TFSA and RESP and then if you still have funds left over, you can invest within a non-registered account.
  • If you’re a young person with an entry-level salary it’s usually best to maximize your TFSA before contributing to an RRSP (except in a scenario where you have an employer-matching pension plan or group RRSP to take advantage of). Let the RRSP contribution room build up and then, when you start making more money and are in a higher tax-bracket, contribute to the RRSP. If the funds aren’t available, the money in a TFSA can be used for RRSP contributions.
  • Once you have children, open an RESP as soon as possible to start collecting those RESP grants. The government is giving you free money. And who doesn’t like free money? And if you have more than one child, set up a family RESP with all kids as beneficiaries.
  • Finally, be sure to designate a beneficiary for each of your registered accounts. RRSPs, TFSAs and RRIF’s can all rollover tax-free to a spouse or common-law partner.