Choosing the Right Retirement Savings Plan: A Comprehensive Guide

If you’ve arrived at this page and are making concrete plans to save for retirement, you’re already in better shape than most of your peers. But which retirement account or accounts is best for you?

What all the major retirement savings plans offer are major tax advantages for those who contribute. People who work full time should absolutely take full advantage of GRSPs, or Group Retirement Savings Plans, which are company-administered retirement savings plan. GRSPs are what are called tax-deferred plans, meaning that any money you contribute under the CRA mandated maximum will not be subject to income tax — so if you make $60,000 and contribute $5,000, the government will only tax you on $55,000 of income. (They will, however, tax the money as income after you withdraw it during retirement.) The major advantage of GRSPs is that most companies will contribute between 3% and 5% of your salary into the account; the downside is that since your company administers it, you’ll have very limited options as to how your money will be invested.

RRSPs, or Registered Retirement Savings Plans are similar to GRSPs except that you administer them yourself, giving you total freedom to invest the retirement savings as you wish. Both RRSPs and GRSPs have a fairly high annual limit, 18% of your income, or $26,010, whichever number is smaller, as of 2017.

Whichever route you go, chances are you’ll also need to open a Registered Retirement Income Fund (RRIF), which is an account designed to dispense your accumulated savings once you retire. In fact, you’ll be required to convert your RRSP or GRSP into either an RRIF or an annuity by the end of your 71st year.