Understanding self-directed RRSPs

A self-directed RRSP account allows you to play a more active role in choosing and managing the investments in an individual or spousal RRSP.

How self-directed RRSPs work

Self-directed RRSPs are available at investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition firms — both full-service and discount brokerageDiscount brokerage A brokerage firm that charges lower fees to buy and sell investments, as opposed to a full-service brokerage. Does not provide investment advice.+ read full definition firms. You can hold many different investments in a single self-directed plan. This makes it easier to keep track of your investments and maintain your desired asset mixAsset mix The percentage distribution of assets in a portfolio among the three major asset classes: cash and cash equivalents, fixed income and equities.+ read full definition.

You can choose:

  • a wider range of investments than are usually available for a bank or mutual fund companyMutual fund company An investment company that pools money from investors and invests it in a mix of investments, such as stocks, bonds, and money market investments. Most mutual fund companies offer a choice of more than one fund.+ read full definition RRSPRRSP See Registered Retirement Savings Plan.+ read full definition, and
  • investments from a number of different companies.
Do you need investment advice?

If you’d like advice on how to invest and manage your RRSP savings, open an account with a full-service brokerage. If you don’t need advice, set up your RRSP account with a discount brokerage and lower the fees you pay. Learn more about getting advice.

Ask about fees

Understand all the fees associated with opening and managing your RRSP. You may pay a set-up fee, an annual trustee fee, and sales charges or commissions for buying and selling investments. You may also pay a fee for investment advice or for managing your investments. Commissions are likely to be lower at a discount brokerage, but you’ll need to be comfortable making investment decisions on your own.

Ask your financial institution if they will waive the annual trusteeTrustee A person or company that you appoint to manage the assets of a trust. You can name more than one trustee.+ read full definition fee. They may agree to do this if you hold other accounts there or if you have enough savings in your plan.

Allocate investments effectively

If you’ve used up your RRSP contribution roomContribution room The amount you can put into a savings plan like a Registered Retirement Savings Plan (RRSP). If you do not put the full amount into the plan each year, you will have extra, unused contribution room that you can use in later years. Example: Let’s say you can contribute $12,000 to your RRSP this year,…+ read full definition and are also saving in a non-registered accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition, consider holding investments that are taxed at a higher rate, such as GICs and bonds, inside your RRSP. And hold investments that are taxed at a lower rate – those that generate dividends and capital gains – in your non-registered account. This reduces the overall taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition you pay and allows your investments to grow in the most tax-efficient way.

Learn more about how investments are taxed.

Key point

A self-directed RRSPSelf-directed RRSP A retirement savings plan that lets you choose from a wide range of investments. You can choose from a wide range of investments or work with an advisor. There are rules about how much you can save each year, and you don’t pay tax on the money that stays in your plan.+ read full definition may be suitable if you:

  • want access to a broad range of investment optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition,
  • are a knowledgeable investor, and
  • have time to manage your investments.

4 questions to ask

  1. Is there a set-up fee?
  2. What are the fees for buying and selling investments?
  3. How much is the annual trustee fee?
  4. What are the fees for investment advice?
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