FEBRUARY 08, 2024
By Sun Life Staff

When is it a good idea to open a registered retirement savings plan (RRSP)? Well, you’re never too young to start saving. And there’s no minimum age required to open an account.

The only age limit in the Canada Revenue Agency (CRA) guide to RRSPs is 71. That’s when the government requires you to shut down your individual RRSP and withdraw money from it.

That means all Canadians who haven’t reached 71 can open and contribute to an RRSP. Just make sure you’ve:

  • earned income in the previous tax year,
  • reported it to the CRA on your tax return to give yourself RRSP contribution room, and
  • calculated your RRSP deduction limit for the year.

If you’ve decided to open your first RRSP, here's what you need to know.

How to open an RRSP at Sun Life

Setting up an RRSP is easy. All you need to do is contact your Sun Life advisor. They’ll be able to explain how to structure your contributions to maximize your savings and investments. They can also help you build a budget so you can manage your money and make it go further by setting up automatic deposits into your RRSP account.

Is there a minimum balance for a RRSP?

There’s no minimum balance needed to start an RRSP. And there are no setup or monthly fees attached to most accounts.

You may, however, pay fees on the individual investments you choose for your plan. Mutual funds, for example, will charge management fees. Your financial institution may take fees directly out of the fund’s returns, so there is no physical bill.

Your advisor will review the fees for any investment before you buy.

How do you choose the right RRSP for you?

Once you’re ready to open an RRSP, choose the type of RRSP that’s right for you. This often comes down to whether you’ll be investing on your own or with others.

One option is an individual RRSP, which is an account registered in your name. The investments held in the RRSP and the tax advantages associated with them belong to you.

Your employer may offer a group RRSP. The benefits of going this route may include:

  • matching contributions from your employer (that means free money for you),
  • lower management fees on the investments you hold in your RRSP, and
  • the ability to make automatic contributions straight from your paycheque.

Another option is a self-directed RRSP, in which you make buy-and-sell decisions yourself. You can invest in common types of qualified investments including GICs, bonds, mutual funds and more. With a self-directed RRSP, you pay commissions on transactions you make – depending on the investments you hold. This is the same as you would in a non-registered brokerage account. In addition, an annual administration fee of about $125 usually applies to these accounts.

There are also spousal RRSPs.

How to open a spousal RRSP with Sun Life

Setting up a spousal RRSP is like setting up a regular RRSP. The only difference is both you and your partner need to be involved in the conversation with your advisor.

Here’s how they work. Let’s say you have a spouse and one of you earns significantly more than the other. The higher earner can make their RRSP contribution to a spousal RRSP. They then claim the deduction to recover tax paid at a higher rate. In retirement, the spouse who earned the lower income (with less opportunity to save for retirement), can:

  • withdraw from the spousal RRSP,
  • pay tax at lower rates (likely), and
  • have overall tax savings.

There are, however, various rules and exceptions around:

  • withdrawing from spousal RRSPs, and
  • calculating the taxable income you and your spouse or common-law partner must report.

You can find detailed information about these rules and exceptions at the CRA’s website.

How many RRSP accounts can you have?

You can open more than one RRSP. Just remember that your contribution limit remains the same, whether you have one or several RRSPs.

Why do you need to choose a beneficiary for your RRSP?

When you’re opening your RRSP, your advisor will ask if you want to name a beneficiary.*

By doing this, your RRSP can bypass your estate and go directly to your named beneficiary when you die. If you name your spouse as the sole beneficiary, the cash can roll into your spouse’s RRSP tax-free.

*If you live in Quebec, you can only name a beneficiary to an RRSP if you’re invested in an insurance product. For example, segregated funds or insurance GICs.

Be aware that naming anyone other than a qualified spouse or partner can have serious tax implications. If you name an adult who isn’t a qualified beneficiary, the value of your RRSP would generally be taxed as regular income in the year of your death.

Need help getting started with an RRSP?

Ready to open an RRSP?

An advisor can help you set up your RRSP and decide which investments to put in it. They can also answer questions you may have about RRSPs or any other financial product.

This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.