A registered savings account is a specific type of savings account that's registered with the Canada Revenue Agency (CRA). FHSAs, TFSAs, RRSPs, and RESPs are all examples of this kind of account.
The primary benefit of a registered savings account is tax-related – you can avoid or defer some of your taxes to a later date. Although the specific rules for each account differ, they all serve the same purpose: to help you save money and minimize amounts owing at income tax time.
Navigating the various registered savings plans offered by the Government of Canada can be time-consuming and frustrating. Our guide breaks down the 6 types of registered savings accounts so you gain a clear understanding of every tax-advantaged savings plan available.
Key Takeaways
- Savings accounts registered with the CRA are known as registered savings accounts.
- RRSPs, TFSAs, RESPs, FHSA, and RDSPs are all types of registered savings plans.
- These accounts offer tax-savings on your money and potential for growth over time.
- There are typically rules on withdrawals and how much you can contribute, which vary depending on which account you have.
Types of registered savings plans
There are 4 types of tax-advantaged registered savings plans as well as the RRIF which is essentially an extension of the RRSP. Here’s the details on each account.
| Type | Use | Contribution limit | Age limit | Example account |
|---|---|---|---|---|
| Tax Free Savings Accounts (TFSA) | Income this account earns is tax-free. | Your contribution limit is based on your age, withdrawals, and previous contributions. | You must be 18 or older. | Questrade TFSA |
| Registered Retirement Savings Plans (RRSP) | This retirement fund is tax-free until withdrawal. Contributions are tax-deductible. |
You can contribute the lesser of the 2: * 18% of your earned income in the previous year, or * the annual RRSP limit. |
There’s no minimum age required to open an RRSP. You can contribute until December 31st of the year you turn age 71. |
Desjardins RRSP |
| Registered Retirement Income Fund (RRIF) | An RRIF is like an extension of your RRSP that you can withdraw from throughout retirement. | You cannot contribute to an RRIF. Your RRSP transfers to your RRIF. |
You must convert your RRSP to an RRIF by the end of the year you turn age 71. | N/A |
| Registered Education Savings Plans (RESP) | Parents use this account to save for their child’s future education. Contributions are matched by the government, up to a limit. |
There’s no annual contribution limit. The lifetime limit for a beneficiary is $50,000. |
Contributions can be made for beneficiaries under age 31. Transfers can be made to the beneficiary at any age. |
Wealthsimple RESP |
| Registered Disability Savings Plans (RDSP) | Parents and others use this account to save for a person who is eligible for the disability tax credit (DTC). | There’s no annual contribution limit. The lifetime limit for a beneficiary is $200,000. |
Contributions can be made for beneficiaries under age 59. | TD RDSP |
| First Home Savings Account (FHSA) | For first-time home buyers to save for their house purchase. | You can contribute $8,000 the year you open the account, with a lifetime limit of $40,000. | You must be between 18 and 71 years old. | EQ Bank FHSA Savings Account |
Registered savings accounts vs. non-registered savings accounts
A registered saving plan must be registered with the CRA to qualify for tax benefits. Non-registered savings accounts are taxable accounts that are not registered with the government. They’re useful for short-term savings since they can:
- be opened at most financial institutions,
- be withdrawn at any time, and
- keep your savings secure while paying a small amount of interest.
Registered accounts are ideal for long-term savings since they offer tax benefits that will help your money multiply faster. You can also usually trade multiple types of investments within registered accounts, which could allow for higher returns than a standard low-risk, low-reward savings account.
Registered savings accounts vs. retirement savings accounts
Not all registered savings accounts can be used for retirement savings but several of them can, including TFSAs, RRSPs, and RRIFs.
The most important distinguishing detail between TFSAs and RRSPs is that you have to pay withholding taxes when withdrawing from an RRSP, but this isn't required when withdrawing from a TFSA.
An RRIF is a bit different from an RRSP too – in fact, the only funds you can hold within an RRIF are those transferred over from an RRSP. You can't make new contributions after this transfer takes place. There are, however, minimum withdrawal requirements that are enforced the year after you open an RRIF.
When choosing between these types of registered savings accounts, you'll need to consider the following details:
- Your household income amounts
- Future tax implications
- Contribution limits
- Your preferred investment options
- Withdrawal rules
- Your personal financial goals
Registered savings accounts vs. high interest savings accounts
While often compared with TFSAs, a high interest savings account is not a registered savings account.
Registered savings accounts are designed to help Canadians save for specific long-term goals while providing tax benefits, but HISAs differ in that they provide competitive interest rates that allow you to earn even more for your nest egg.
There are no looming penalties or restrictions with an HISA either. Essentially, where registered savings accounts offer tax advantages, HISAs provide liquidity and flexibility.
The choice between these 2 will depend on your personal investment goals, ideal timeframe, and personal risk tolerance.
Benefits of a registered savings account
Among other benefits, registered savings accounts have these main perks:
- Saving your money in a tax-sheltered or tax-free account will enable it to grow faster.
- You may be eligible for grants with RESPs and RDSPs.
- RRSP funds can be used to buy a new home, build a home, or for continuing education.
- Capital gains are not taxed in most of the registered savings accounts.
What to consider with a registered savings account
Here are a few important drawbacks to consider:
- There are limits on how much you can contribute.
- Accessing your money is more complicated than with non-registered accounts.
- You may face penalties for excess contributions.
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$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.Your savings goals in a registered savings account
Registered savings accounts should be a key part of every Canadian’s financial plan.
But before opening an account or making your next deposit, take a moment to reflect. What goal are you saving for? What account should you max out first? What is your risk tolerance and time horizon?
Let us know what you learned or action steps you’re taking in the comments below.
FAQ
What is a registered savings account?
A registered savings account is an account that’s registered with the CRA and receives various tax advantages on your contributions. There are several types of registered accounts, including an RRSP, TFSA, RESP, RRIF, RDSP, and FHSA.
Can I withdraw from my registered savings account?
Yes, but how much, and how it affects your contribution room and tax status, depends on the type of account you’re withdrawing from. For example, when you withdraw from your RRSP, you’ll be subject to withholding tax.
Is a tax free savings account registered?
Yes, a tax-free savings account, also called a TFSA, is a registered savings account. All income earned within the TFSA will not be taxed. The amount you can contribute to your TFSA is based on your available contribution room and income earned within the TFSA will not be taxed.
Is registered savings the same as RRSP?
RRSPs are just one type of registered savings account, but there are several more. Other registered accounts that can be used for retirement savings include tax free savings accounts (TFSAs) and registered retirement income funds (RRIFs).
How do I open a registered savings account?
To open a registered account, you can visit any financial institution or bank that offers the account you’re looking for. Some accounts have certain requirements, such as age, so be sure to talk to your financial advisor about your options.
How does an RDSP work?
A registered disability savings plan (RDSP) is used to help save money for those receiving the disability tax credit. Eligible account holders oversee contributions and the beneficiary receives payments from the account.
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