What are the different types of registered accounts?

Registered accounts allow investors to benefit from tax savings and there are a variety of options. Each account has different rules and can help investors achieve different objectives. This video will help you understand how you can utilize registered accounts in your investment plan to support your investment goals.


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Video Transcript

A registered account is an investment account that is given a tax advantage by the government. An easy way to look at the different types of accounts is to categorize them by the goal of the investor. 

The three main goals of registered accounts are to cover retirement savings, education savings and general savings. 

Retirement savings

If someone is looking to save for retirement, they can use a Registered Retirement Savings Plan. 

Registered Retirement Savings Plans (RRSPs)

RRSPs are tax deductible. This means, the amount contributed to an RRSP can be deducted from an individual’s taxable income and potentially reduce the amount of tax owed. 

The government specifies an allowable limit for contributions and if unused, this limit carries forward. Any investment income earned in the RRSP is usually exempt from tax as long as the funds remain in the plan. Taxes are paid when funds are withdrawn from the account. This is usually done in retirement when the individual is in a lower tax bracket.

Spousal Registered Retirement Savings Plans (SRRSPs)

There is also the option of a Spousal Registered Retirement Savings Plan. Just as it sounds, it allows and individual to contribute to their spouse’s RRSP. It is often used to lower the tax of a couple when they withdraw the funds in their retirement. 

Locked-In Registered Account (LIRA)

Another options is a Locked-In Registered Account. A LIRA is for individuals who have a pension plan through their employer and leave their job. At this point, they will need to decide what to do with their pension. One option may be to transfer it into a LIRA. The savings will be kept locked in, meaning that they won’t be able to withdraw funds until retirement.

Education savings

The next goal that registered accounts cover is education savings. This can be done with a Registered Education Savings Plan. 

Registered Education Savings Plans (RESPs)

There are different types of RESPs, but in most cases, investors use it to save for their children’s or grandchildren’s education. It can be a good way to save because the government also contributes funds. 

A RESP grows without being taxed until the grants and investment gains are withdrawn. In most cases students benefit from this money without incurring any tax.

General savings

The last goal is general savings. This can be achieved with a Tax-Free Savings Account. 

Tax-Free Savings Account (TFSA)

TFSAs have an annual contribution limit that builds up if unused. Although the contributions are after-tax dollars, the investment income inside the TFSA is tax-free. When funds are withdrawn, they will not be taxed. TFSAs are flexible and can be used for any savings goals an investor may have.

Contribution limits

In all the mentioned registered accounts, there are contribution limits and these need to be discussed and monitored to ensure they are not exceeded. 

Other benefits

What is unique to registered accounts is that they can all have beneficiaries. This has important estate planning benefits. They are also creditor-proof and have liability protections which can be beneficial to investors.

Speak to your financial advisor to learn more about how you can utilize registered accounts to achieve your savings goals.