As you probably already know, Canadian taxpayers are eligible to contribute to their retirement savings through something called an RRSP.  Some of you might actually contribute too… for those who do: Good Job!; for those who don’t: START NOW!

If you’re a little confused by all the banking acronyms out there (RRSP, RSP, LIRA, LRSP, etc., etc…) I don’t blame you.

First:

  • RSP = Retirement Savings Plan
  • RRSP = Registered Retirement Savings Plan

In general: RSP = RRSP – when people say one, they mean exactly the same thing.  The “Registered” part has to do with the fact it is registered with the Federal Government, allowing you to take advantage of the benefits of holding an RRSP.

As for the other acronyms… we’ll worry about them later.

Now, the biggest part of the shroud of secrecy that surrounds RRSPs has everything to do with the last letter of the infamous acronym.

P = Plan

An RRSP isn’t an investment on it’s own, like a stock, mutual fund, a bond, or a Guaranteed Investment Certificate (GIC):  It’s a PLAN.  It’s a portfolio to hold investments inside.  If it helps, think of it as a manilla folder that you hold your investment statements inside.  Of course banks and investment brokers confound and confuse you by asking you “Have you bought RRSPs this year?”

You can have virtually any kind of investment in an RRSP:

  • stocks
  • bonds
  • GICs
  • mutual funds
  • cash (Yes, even plain old cash… sitting there earning little to no interest)

When you go to a bank or broker and “buy an RRSP”, you are getting some combination of the above.

The other part about the Plan is that you can hold multiple RRSPs.  For example, you could have:

  • A Mutual fund account from your Big-5 bank (RBC, TD, Scotia, BMO, CIBC)
  • Stocks through a discount brokerage
  • A high-interest savings account from an online bank (ING, PC, etc.)
  • Canada Savings Bond RRSP

There are no restrictions on the number of accounts you can hold, and only a few restrictions on the types on investments.  See the Canada Revenue Agency’s RRSP website if you’re more curious.

Written by Roy Thompson

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