Looking for the best RRSP in Canada? Whether you’re looking to use your RRSP as a savings account, or use it to invest, this article will show you what to do.
Using an account that offers the best RRSP rates and offers flexibility to access your funds when you need them might be the best way to go.
Your money can continue growing in the account without incurring any income taxes on your earnings until you make withdrawals, making it an ideal way to grow your wealth.
Some of the best RRSP interest rates in Canada include:
- EQ Bank: 1.25%
- Motive Financial: up to 1.25%
- Implicity Financial: 1.10%
You can also check out the best High-Interest Savings Accounts (HISA) in Canada for accounts that offer higher interest income without the tax-sheltered status of the RRSP.
In this post, I will briefly discuss what an RRSP is, the best RRSP rates in Canada, and how to make good use of your RRSP.
What Is an RRSP?
A Registered Retirement Savings Plan (RRSP) account is a government-registered plan created to keep retirement savings for Canadians. The federal government created this account type in 1957 to encourage better savings practices among Canadians.
The account comes with tax advantages that incentivize Canadians to set aside money in their retirement nest egg. The tax advantages include zero taxes on interest, capital gains, or dividends earned until you begin making withdrawals from the account.
Another significant tax advantage is that RRSP contributions are tax-deductible. It means that you can lower your taxable income by lowering your income taxes at the source or get a refund of excess taxes during tax season.
To make things even better, RRSPs can also help you fund financial milestones before retirement, like buying a new home. From savings accounts to stocks, you can use the account to hold various types of investments.
The Best High-Interest Rate RRSP Savings Accounts in Canada
If you want to open a cash savings account that offers high interest rates, RRSP accounts offered by online banks and credit unions are the best options to consider. There may be a drastic difference in the basis points between rates offered by digital banks and traditional banks.
I have listed down the RRSP savings accounts that do not charge you a monthly fee. They also ensure that your contributions are tax-deductible and that your revenues remain tax-free until you make withdrawals.
EQ Bank RSP Savings Account
EQ Bank recently introduced an RSP savings account. It offers one of the best interest rates you can find for RRSPs available in Canada right now.
You can open an account with EQ Bank without worrying about a minimum balance. The digital bank does not charge you any monthly fees, and you can even set up automatic monthly RRSP contributions.
EQ Bank is a subsidiary of the Equitable Bank and offers your account balance insurance coverage through the Canadian Deposit Insurance Corporation (CDIC) for up to $100,000 of your deposit.
- Interest rate: 1.25%
- Minimum balance: None
- Insurance: CDIC
Tangerine RRSP Savings Account
Tangerine also offers exceptional interest rates for Canadians who want to open an RRSP savings account. It currently has a promotional rate of 2.10% for five months, but its interest rate will go down to 0.10% after the promotion ends.
You can open an account with Tangerine without worrying about a minimum deposit or monthly fees, and you can enjoy an automatic savings plan that makes it easy to save regularly.
The Bank of Nova Scotia owns Tangerine, and the CDIC insures your account balance for up to $100,000.
- Interest rate: 2.10% (promotional), 0.10% (after promotion ends)
- Minimum balance: None
- Insurance: CDIC
Motive Financial RRSP Savings Account
Motive Financial also offers some of the best RRSP rates in Canada for savings accounts. The online bank offers varying interest rates for Canadians with an RRSP savings account with the institution, depending on their account balance.
For Motive Financial RRSP Savings Account users with a balance lower than $2,500, the interest rate is 0.25%. If your account balance with Motive Financial is $2,500.01 and more, you can enjoy returns with an interest rate of 1.25%.
Motive Financial is the online banking segment of the Canadian Western Bank, and it provides CDIC coverage for up to $100,000 of your deposits.
- Interest rate: up to 1.25%
- Minimum balance: None
- Insurance: CDIC
Achieva RRSP Savings Account
Achieva is another online bank that offers excellent RRSP rates for Canadians looking to open an RRSP savings account. Its RRSP Savings Account does not require a minimum deposit to open the account or monthly fees.
You can also set up a pre-authorized contribution plan that automatically transfers funds from your primary financial institution to your Achieva RRSP Savings Account. Achieva is the online banking arm of the Cambrian Credit Union, and it offers a 1.20% interest rate.
Additionally, you get 100% deposit protection from the Deposit Guarantee Corporation of Manitoba (DGCM). This protection is available to account holders, regardless of their province of residence.
- Interest rate: 1.00%
- Minimum balance: None
- Insurance: DGCM
Implicity RRSP Savings Account
Implicity also offers high-interest RRSP savings account for Canadians with an excellent interest rate. There is no requirement for a minimum balance for the savings account. However, if you decide to move your funds to one of its RRSP term deposit accounts, you will need a $1,000 balance.
Implicity was launched in 2012 and is owned by the Entegra Credit Union. Your Implicity Financial RRSP Savings Account is guaranteed without limit through the DGCM, and your funds are guaranteed regardless of where you live in Canada.
- Interest rate: 1.10%
- Minimum balance: None
- Insurance: DGCM
When it comes to opening an RRSP savings account for placing your funds, EQ Bank offers some of the best RRSP rates along with an overall excellent user experience. However, you can use an RRSP for so much more than storing cash.
The Best Robo-Advisors for RRSP Users
Robo-advisors offer an ideal way to help you maximize your long-term returns in an RRSP by investing in a portfolio of securities for you so that you can enjoy tax-free wealth growth. Robo-advisors like Wealthsimple Invest and Questwealth provide you with an all-in-one solution tailored to your financial goals and risk tolerance when you sign up.
Wealthsimple is the best robo-advisor product in Canada that matches you with a low-cost portfolio of diversified ETFs for a one-stop and hands-off RRSP investing solution. The robo-advisor relies on advanced algorithms that rebalance your ETF portfolio and keep it aligned with your risk tolerance and investment objectives.
Wealthsimple has a reputation for offering excellent long-term wealth growth. It offers three different types of portfolios correlated with varying risk tolerance levels (i.e., conservative, balanced, and growth). Each portfolio offers a different mix of ETFs with varying exposure to equity securities and fixed-income securities.
Wealthsimple also offers Socially Responsible Investment (SRI) and Halal portfolios for investors who want to invest while adhering to their moral values and beliefs.
You can open an RRSP account through the robo-advisor to store your tailored ETF portfolio for tax-deferred growth. Check out my detailed Wealthsimple Review here to learn more about the robo-advisor.
Questwealth is another top robo-advisor with whom you can open an RRSP account to store an ETF portfolio. Questwealth is the robo-advisor product offered by Questrade, and it offers some of the lowest fees in the industry.
Questwealth offers five different portfolio types that you can choose from, depending on your risk tolerance and objectives. Its portfolios range from aggressive to conservative, offering varying exposures to equity securities and fixed-income securities to correlate with the objectives of each portfolio.
Questwealth offers actively managed portfolios. Therefore, unlike Wealthsimple, its portfolios are managed by human financial experts who tweak the ETF portfolios to keep them aligned with your investment goals and risk tolerance levels.
Questwealth also offers SRI portfolios with varying risk tolerance levels for investors who seek socially responsible investments. You can open an RRSP account through Questwealth to store your ETF portfolio for tax-deferred growth.
Check out my detailed Questwealth Review here to learn more about this robo-advisor.
Wealthsimple and Questrade are alternative financial institutions that offer various products that you can use to invest using a hands-off approach (i.e., robo-advisors) or a self-directed investing approach (i.e., online brokerage platforms).
The Best Online Brokers for RRSP Users
If you are interested in long-term growth and want to create your own portfolio of individual stocks, bonds, and other securities, you could consider investing through Questrade and Wealthsimple Trade.
You can use these trading platforms to purchase international securities that are also ideal for your RRSP. The self-directed approach to investing ensures that the decision-making regarding how your capital is invested remains entirely in your hands.
There is no shortage of online trading platforms available in Canada. Questrade is my top trading platform. Another top option for new investors could be Wealthsimple Trade, a mobile-only trading platform with zero trading fees on thousands of Canadian stocks. You can check out my list of the best trading platforms in Canada to consider other options.
Questrade is a top choice for many self-directed Canadian investors due to its low-fee structure and ease of use. You can open a Questrade RRSP account online within minutes and begin trading shortly after that. The platform does not charge any fee for opening an RRSP account.
It boasts one of the lowest commission fees in the industry. It also does not cost anything to purchase ETFs. Buying and selling equity securities is only $0.01 per share, with a minimum charge of $4.95 up to $9.95. Questrade also allows you to trade on Initial Public Offerings (IPOs), precious metals, and more.
Questrade also gives you access to valuable research tools that can help you make more well-informed trading decisions. Check out my detailed Questrade review to learn more.
Wealthsimple Trade is the only trading platform in Canada that charges zero commissions for trading using the online broker. Questrade might be the best trading platform, but it charges commissions of $4.95 to $9.95 per trade. Hence, investing through Wealthsimple Trade can save you a lot.
Wealthsimple Trade works better for passive investors seeking diversified ETFs listed in Canada. You can track the performance of specific market segments, indexes, and the global stock market. Wealthsimple Trade also offers RRSP accounts like Questrade does.
Unlike Questrade, however, Wealthsimple Trade is geared more towards a more straightforward investment approach. It does not offer access to in-depth analytical tools or stock screeners like Questrade.
Wealthsimple and Questrade are excellent alternatives to traditional financial institutions for investors seeking low-cost investing solutions. Choosing which one to work with could depend on your financial goals and investing style.
I believe that Wealthsimple is better for investors who want a hands-off approach to investing through its robo-advisor product. Questrade could be a better choice for you if you are an active trader interested in self-directed investing through its online brokerage.
Check out my detailed Wealthsimple Trade review to learn more about this platform. Here is my Questrade vs. Wealthsimple comparison (please link to the comparison post when it is live on the website) for a more in-depth comparison between the two online financial institution powerhouses in Canada.
Best Platform for Investors Using RRSPs for Mutual Funds
If you are interested in investing in mutual fund products, you can consider using Qtrade as your preferred online trading platform for an RRSP.
At a flat rate of $8.75 per trade, Qtrade charges a much higher commission on stocks and ETFs than Wealthsimple Trade and Questrade. It also charges a $25 administration fee every quarter that you can waive by holding a minimum of $25,000 in your account.
Qtrade’s trade-off for the high commissions on stocks and ETFs is its completely free mutual funds purchases. However, I personally do not recommend mutual funds as a Canadian investor. You can check out my video below on why mutual funds are awful to understand what I am talking about.
Things to Learn Before You Invest
By now, you probably already know about the best RRSP savings accounts that offer high interest rates, robo-advisor products for RRSP investors with a hands-off investing approach, and the best online brokers if you want a self-directed approach to investing using your RRSP.
But before you invest in an RRSP, it is better to learn more about the different account types.
The different types of RRSPs available in Canada
You can use an RRSP to save money for your retirement and your spouse. If your employer offers a group RRSP and will match a part of your contributions, you should not pass on the opportunity. Contributions from your employer provide significant no-risk returns on your investment that you might not be able to match elsewhere.
The individual RRSP comes with an annual contribution limit each year. Depending on whichever is lower, you can contribute a total of 18% of your annual income or a maximum of $27,830, which is the contribution limit for 2021. Contributions to any employer-sponsored pension plans are also deducted from your contribution limit.
If you contribute less than your contribution limit in any given year, you can carry over the unused contribution room for future years.
You can also contribute to your spouse’s RRSP while funding your own. Any contributions you make to a spousal RRSP also count towards your contribution limit.
However, making spousal RRSP contributions could be a clever way to split your income to qualify for a lower tax bracket when you retire. Any taxable earnings from your RRSPs will be divided between the two spouses on retirement, allowing you to lower the tax bracket for your overall retirement income.
Group Registered Retirement Savings Plans are effectively RRSPs set up by employers. These accounts come with benefits like contribution matching, where employers match a portion of your contributions to the account, and automatic payroll deductions.
I recommend prioritizing a GRRSP, if available, with the employer you work with to get the best possible return on your investments. Remember that GRRSP contributions also contribute to your annual RRSP contribution limit.
Types of Investments You Can Hold Inside Your RRSP
You can hold a wide range of investments in an RRSP, and you can choose as many as you want to meet your investment goals. Depending on your investment horizon, risk tolerance, and other factors, you can use different types of investments to create a diversified RRSP portfolio.
Remember that you cannot hold all types of investments in an RRSP. Some of the investments that do not qualify for RRSPs include:
- Investing in a business in which you hold an interest of 10% or higher;
- Precious metals besides gold and silver;
- Commodity futures contracts;
- Private holding companies;
- Private foreign corporations;
- Your own debt; and
- Personal property.
Let’s take a look at the different types of RRSP accounts you can consider.
The simplest way to save your money is by putting it in a savings account.
I generally do not recommend parking your capital as cash in a savings account since it yields a lower interest than other investment forms. However, it is a no-risk investment. If you have a substantial account balance in one of the accounts offering the best RRSP rates in Canada, you can generate significant long-term returns.
You can always decide to take the accessible cash in your RRSP and purchase other investments within the same RRSP accounts later. If you are not sure which investments are ideal for your financial goals, you can still open an RRSP savings account and start deferring your taxable income until you can figure it out.
Guaranteed Investment Certificates
Guaranteed Investment Certificates (GICs) are another low-risk and low-return investment that you can set up within an RRSP. These investments provide you with a guaranteed rate of investment on predetermined terms.
When you invest in a GIC, you will know how much returns you can gain from it. However, the interest earned on GICs is typically subject to tax rates that go as high as 50%. Holding GICs in RRSP shelters your returns from these taxes.
You can also consider investing in professionally managed mutual funds. Mutual funds are a popular choice for Canadians who like to invest through traditional financial institutions for RRSP investments. Mutual funds are made using a variety of investments bundled into one fund. However, mutual funds charge significantly higher management fees.
Exchange-Traded Funds (ETFs)
ETFs are relatively new to the investing world but are becoming increasingly popular as an alternative to mutual funds. Investors interested in exploring self-directed RRSPs prefer these securities. ETFs are effectively a collection of stocks and bonds designed to track the stock market over time.
As the market goes up, so does your investment. You can also lose the money invested in an ETF if the market goes down. Robo-advisors like Wealthsimple and Questwealth use a combination of ETFs to create different portfolios for hands-off investors.
Equity and Fixed-Income Securities
Self-directed investors who want to invest in individual equity and fixed-income securities can also hold their investments in an RRSP.
Stocks are typically more volatile investments and are ideal for investors with higher risk tolerance. On the other hand, fixed-income securities offer greater security to your investment capital but do not offer returns as high as stocks.
You can work with a traditional broker or online brokers like Questrade and Wealthsimple Trade to manage your investments in stocks and bonds.
The RRSP is an invaluable investment vehicle for Canadians saving up for their long-term financial goals and building a retirement nest egg.
I hope that this post helped you better understand the potential of an RRSP, how you can use it, and the different types of investments you can make using an RRSP.
I provided the accounts with the best RRSP rates for investors looking to create an RRSP savings account. Questrade and Wealthsimple also offer excellent investment platforms if you are interested in hands-off investing through a robo-advisor or self-directed investing through a discount broker.
But if you are only looking to open an RRSP savings account for no-risk returns, EQ Bank offers much better interest rates than the Big Banks and its peers.