Canada offers a variety of investment accounts tailored to different financial goals, from retirement and education to general wealth building. By utilizing tax-advantaged accounts such as RRSPs, TFSAs, and RESPs, Canadians can maximize their investment potential while minimizing taxes. For those who have maxed out their registered accounts, non-registered investment accounts offer additional flexibility and investment opportunities. Understanding how these accounts work is key to building a strong financial future in 2025 and beyond.
Registered Retirement Savings Plan (RRSP)
An RRSP is a tax-advantaged account designed for long-term retirement savings. Contributions to an RRSP are tax-deductible, meaning they reduce taxable income in the year they are made. Investment growth inside the account is tax-deferred until funds are withdrawn, typically in retirement when the individual may be in a lower tax bracket.
- Contribution limit: 18% of the previous year’s earned income, up to an annual maximum ($32,490 for 2025).
- Withdrawals are fully taxed as income.
- At age 71, an RRSP must be converted into a Registered Retirement Income Fund (RRIF) or an annuity.
Non-Registered Investment Account
A non-registered investment account does not offer specific tax advantages but provides flexibility in investing and withdrawing funds. These accounts are suitable for individuals who have maxed out their RRSP and TFSA contribution limits and want additional investing options.
- No contribution limits.
- Capital gains are taxed at 50% of the individual’s marginal tax rate.
- Interest income is fully taxable, while dividends benefit from a tax credit.
- Can hold stocks, bonds, ETFs, mutual funds, and more.
Registered Education Savings Plan (RESP)
An RESP is a tax-advantaged account designed to help families save for a child's post-secondary education. Contributions are not tax-deductible, but investment growth is tax-deferred, and government incentives, such as the Canada Education Savings Grant (CESG), help boost savings.
- Lifetime contribution limit: $50,000 per beneficiary.
- CESG: The government matches 20% of contributions, up to $500 per year, with a lifetime maximum of $7,200.
- Withdrawals for education are taxed in the student’s hands, often at a lower tax rate.
Tax-Free Savings Account (TFSA)
A TFSA is a flexible investment account that allows individuals to contribute after-tax money, with investment growth and withdrawals remaining tax-free. This makes it an ideal account for both short-term and long-term savings.
- Annual contribution limit: $7,000 for 2025.
- Unused contribution room carries forward indefinitely.
- Withdrawals do not affect government benefits and can be re-contributed in future years.
Pension Plans
Many Canadians also contribute to pension plans, either through employer-sponsored plans or government programs. These include:
- Canada Pension Plan (CPP): Mandatory contributions for working Canadians, providing a stable income in retirement.
- Old Age Security (OAS): A government-funded pension available to eligible seniors.
- Workplace Pensions: Employer-sponsored plans, such as defined benefit and defined contribution plans, helping employees save for retirement.
Registered Disability Savings Plan (RDSP)
An RDSP is designed to provide long-term savings for individuals with disabilities. Contributions are not tax-deductible, but investment growth is tax-deferred. Government grants and bonds can significantly enhance savings.
- Government contributions include the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB), based on income and contributions.
- Withdrawals are structured to provide long-term financial security.
