With the RRSP contribution deadline looming, the advertising blitz is on to get your attention and retirement dollars. If you're a newer investor, you may be looking for that perfect place to open your RRSP account. There are several choices to consider.
Choosing where to open an RRSP account is different from deciding what to invest in. Since an RRSP is just a container to hold eligible investments, the key is to open your RRSP account at a financial institution that meets your needs.
You don't need to stick to just one RRSP account either -- you can open several RRSP accounts at a variety of financial institutions as long as you don't exceed your total contribution limit. Then, at each institution, you can choose among the firm's various investment options for your RRSP account.
- Mutual fund fees can eat into your retirement savings, see how with the Portfolio Fee Calculator -- results will shock you!
For now, let's look at the advantages and disadvantages to opening your RRSP account at a variety of financial institutions.
1. Your Bank or Credit Union
Opening an RRSP can be as easy as walking into your regular bank or credit union and filling out the paperwork.
- Pros: Your RRSP account is located at the same institution where you bank, providing a familiar place for you to get started. Plus, they often have ready-made portfolios making it simple for new investors. The "Big Banks" can offer many investment types, including GICs, mutual funds, and index funds.
- Cons: Investments are often limited to the institution's offerings, and account fees and mutual fund fees may be high.
You may also consider opening your RRSP account with an online bank where account and fund fees may be less expensive.
2. Your Employer or Group RRSP
If your employer offers a group RRSP plan and matches contributions, then you could be in for some free money.
- Pros: Contributing to your RRSP every pay period helps you consistently build your retirement savings, and getting your employer to match contributions could help you retire sooner. Your company sponsored plan may offer low-fee and no-load mutual funds -- be sure to ask!
- Cons: Many group plans are limited to the predetermined investment options your employer offers. There may also be plan fees and rules for when and how you can withdraw funds from your account.
Joining a group plan is easy; just contact your Human Resources department and fill out the paperwork. Your contributions are then taken from your pre-tax pay as payroll deductions, reducing your income tax immediately. Your contributions are deposited into your RRSP as specified.
3. An Online Broker
If you're a do-it-yourself investor, then opening an RRSP account with an online broker may be for you.
- Pros: Online brokers give you a centralized place to invest in mutual funds, exchange-traded funds (ETFs), stocks, bonds, and a myriad of other investments from a variety of fund companies.
- Cons: It may be overwhelming for new investors to build their own portfolio, but there are many investor sites online (for example, MoneySense) if you're willing to learn. Be sure to look at account fees, MERs, loads, and transaction costs before signing up with an online broker.
The Globe and Mail does an annual review of online brokers and gives you the top tips for opening an account that's right for you.
More on RRSPs:
Your Turn: Do you have more than one RRSP account? Got any tips to share?
You talk again about high fees on mutual funds. What about the yearly account fee you pay at a brokerage house. What about the commission paid to the broker? And what about the cost to do each trade? Personally, I am not an investment wizard and I would rather pay someone who has studied and worked within the market for years to manage my money, than to try and build my own portfolio. But then again, I prefer to go to a Dentist to have my tooth fixed rather than to do it myself. Sure it costs more, but its money well spent.
Posted by: Carla | 03/02/2010 at 11:53 AM
I bought a bottle of rum (at duty free (for $16 US) and when I got home I discovered I still had the same bottle of rum I had purchased a few years earlier for $13 US.
The $16 US bottle actually cost less than the $13 US bottle.
The $16 US bottle cost 16/.98 or 16.33 CDN while the $13US bottle cost 13/.72 or 18.06 CDN so the $16 bottle cost less in Canadian funds than the $13 bottle.
The currency in the US is becomming worthless at a more rapid rate than the Canadian currency.
THAT IS SCARY!
Posted by: John | 03/30/2010 at 02:48 PM
With this kind of set up, we can really see which is better way. Thanks for these information.
Posted by: Property Hanoi | 08/11/2010 at 05:02 AM
What about the yearly account fee you pay at a brokerage house. What about the commission paid to the broker? And what about the cost to do each trade? Personally, I am not an investment wizard and I would rather pay someone who has studied and worked within the market for years to manage my money, than to try and build my own portfolio. But then again, I prefer to go to a Dentist to have my tooth fixed rather than to do it myself.
Posted by: Gainesville dentists | 09/21/2010 at 05:05 AM