Back to learn

How many RRSP Accounts can I have

4 min read

how many rrsp accounts can I have

Written By

Brandi Marcene

The Registered Retirement Savings Plan (RRSP) plays an important part in Canadian citizens' plan life. If you're a Canadian citizen, you might have or plan to have an RRSP account to plan for your future. Some of you might have and face issues likehow interest rates affect retirement plans orRRSP withdrawal policies.

These issues might make you think you want more than one RRSP account. Before diving into that, let's fully understand what RRSP is.

What is RRSP?

The Registered Retirement Savings Plan (RRSP), often called a Registered Retirement Income Fund (RRIF), is a savings plan specifically designed to help you save for retirement. It saves money for retirement in Canada, a program like a home savings account. In addition to saving for retirement, RRSPs offer special tax advantages and benefits that can be beneficial before you retire. If you file an income tax return and have earned income, you can open and contribute to an RRSP.

There are various options available for opening an RRSP, including:

  1. Investment firms

  2. Mutual fund companies

  3. Banks and trust companies

  4. Life insurance companies

  5. Credit unions and caisses populaires

You can open an RRSP at any age, as long as you have earned income and filed a tax return to pay tax. However, it is important to note that you must close your RRSP accounts when you reach the age of 71. The deadline to contribute to your RRSP for the 2023 tax year is February 29, 2024. If you make any contributions after this date, they will be applied to the 2024 tax year. You can open an RRSP early as 18 with income and a business.

It is one of Canadian financial institutions' best saving plans, and the RRSPs are not too difficult to understand. You contribute money, may get a tax refund, and see your savings increase until you retire.

Guaranteed Investment Certificate (GIC) vs RRSP Accounts

Some of you might have confused RRSP accounts with GIC. They do sound alike but are quite different. RRSPs enable your money to grow without being taxed immediately, allowing you to accumulate more interest over time. GICs are considered secure as they come with a guarantee, ensuring that you won't experience any loss on your initial investment. By contributing to an RRSP, you can reduce the income tax you need to pay while employed.

But Is It Important To Have A RRSP Account?

There are several reasons why using an RRSP to save for retirement is beneficial:

  1. Tax deductions: Contributions made to an RRSP are tax-deductible, meaning they reduce your taxable income. This can result in a lower tax bill or a larger tax refund.

  2. Tax-free growth: Any interest or investment earnings within an RRSP are not taxed as long as the money remains in the plan. Plus, there is a tax-free savings account as well, which the financial institutions provide.

  3. Deferral of taxes: Since RRSP contributions are made with pre-tax dollars, you won't pay taxes on that money until you withdraw it from the plan. This includes both your funds contributed and any investment earnings.

  4. Spouse's RRSP: If you earn more than your spouse, contributing to a spouse's RRSP plan can help build their tax-free savings. This can result in a more equal distribution of retirement income and potentially reduce the overall tax burden for spousal RRSPs.

Different Types of Fees For RRSP

The fees for RRSPs can vary depending on where you open your account and how you invest your savings. There are different types of fees you might encounter:

  • Account opening fee - Some institutions may charge a small set-up fee, but usually, there is no charge to open an RRSP account.

  • Annual administration or trustee fee - The fees can vary, and your company may cover this cost if you have a group RRSP. Make sure you know what these fees are before opening an account.

  • Investment costs - You pay a commission when buying and selling stocks and ETFs and may also pay a sales charge for mutual funds. There is also a management expense ratio (MER) for mutual funds or ETFs.

  • Other costs - Additional fees may apply for certain services, such as transferring money to another RRSP or closing the account.

How Much RRSP Contribution Room Be

The RRSP contribution limits how much you can contribute to your RRSP each year. You can contribute less than 18% of your income in the previous year or the maximum contribution amount for the tax year. You will receive this information in your Notice of Assessment after filing your tax return.

If you are unable to contribute in one year, you can carry forward your RRSP contribution room for future use. If you are part of a pension plan, your pension adjustment will affect the amount you can contribute to your RRSP.

You might be asking if you can create more than one account for RRSP, which will be discussed as follows.

How Many RRSP Accounts Can I Have?

The answer depends on many things that determine whether you can have more than one account for RRSP. This includes things like a lower tax bracket, withdrawal money, a qualified investment, and much more. You can have multiple RRSPs without any limit, but the total contribution room for all your accounts remains the same as if you had only one. If you own several RRSPs, you might be spending more on fees than needed. These fees can vary from $25 to $200 per year per account, depending on the financial institution. When you add up the fees for all your RRSP accounts, the costs can accumulate significantly.

Plus, if you want multiple accounts in different types of financial institutions, then that would be difficult and complicated. Different financial institutions have different sets of rules and policies to follow. Plus, it is important to follow the rules as both you and the government benefit from them, and they are laws that have to be followed no matter what. This can lead to confusion and can cause problems when it comes to submitting documentation, which can lead to a chance of errors and mishaps. Effecting in the future. There are many pros and cons of multiple savings accounts.

The Contribution Limits Remain the Same

The contribution limits are the same, no matter how many accounts you have. Your RRSP room can vary based on factors like unused contribution room from previous years, pension plan contributions, over-contributions, and earned income from the previous year.

To find out your RRSP contribution limit, check your Notice of Assessment from the Canada Revenue Agency. This document is sent to you after processing your tax return and will show your available contribution room after accounting for pension contributions and unused room from previous years. Ask a professional financial expert for advice and a common law partner for law advice.

Thinking Of Doing Automate Contribution limits

To prevent issues with RRSP deadlines, consider setting up automatic monthly withdrawals from your chequing account into your RRSP. This will help you avoid last-minute contributions and potential penalties. Additionally, investing regularly can help you take advantage of dollar cost averaging.

Depending On Your Income

The income you have can play an important role in how you look at things and how RRSP is affected by the tax system that you have to pay from your income or your RRSP account. Contributing money to an RRSP lowers your taxable income. The higher your contributions, the greater your tax savings are gonna be. It's important to remember that there is an annual contribution limit for everyone, which is the maximum amount you can invest in an RRSP each year. This limit varies based on your income.

The income you have will not differ from how many RRSP accounts you have. Your income now would be more divided into your RRSP different accounts. This means each account of yours may receive a piece of your income, but in the end, the contribution is limited. For example, for each month of 2023, the data on contributions showed that a fixed $250 limit is kept as a regular type of contribution. That is of a single individual RRSP account, which means even if they contributed a total of $250. They might have divided this 250 into their different RRSP accounts, like $50 in one account, $100 in another, and so on.

More Documentations

Having more accounts will mean more paperwork and more documents to keep safe of RRSP accounts. This will also mean to memeorize differnt details of differnent rrsp accounts. This might seem like a small thing, like how much money is in different accounts RRSP, but the different information to put in for security should be remembered. You can't just write it on paper and put a magnet to it on the refrigerator. It is a piece of confidential information that should not be kept open, meaning only some people should know the details about the RRSP account.

This will lead to more management of things. Memorizing confidential information and trying to avoid scams, like fake emails and calls asking for details of your many RRSP accounts, are important.

Reviewing The Latest Statement Of the RRSP Account

Make sure to go through the most recent statements for all of your RRSP accounts before consolidating. Reviewing your statements will allow you to compare the fees you're paying and the performance of each account in recent years. This will help you decide which account or institution to consolidate to or if you should move your RRSPs to a new place because a comparison will give you a better idea of which financial institution is better and whose services are more reliable and effective.

Just remember that it's not a straightforward comparison. For instance, comparing the performance of a growth fund (focused on appreciation with fewer dividends) to a money market fund (a low-risk fund with lower returns) wouldn't be fair.

Transferring Time For Consolidation

It's better to transfer your investments 'in-kind' when consolidating your RRSP accounts as long as the receiving institution can hold those assets. This statement means to be aware of your assets as they are important. This includes RRSP accounts as well. The financial institution is to be secured and not become a target of hackers. If the financial institution has a history of being hacked or any other concerning security issues, then it's better not to go there at all or use their services.

The Investment Funds

It's simpler to evaluate if your investments are right when all your RRSP assets are in one place. This becomes crucial when you start withdrawing for income or, as you near 71, when RRSP assets must be converted to an RRIF or used for an annuity.

Physicians nearing retirement often adjust their portfolios to lower investment risks. Consolidating assets at one institution means fewer statements and easier adjustments for retirement. Otherwise, it's challenging to see the full picture of your investment allocation across various risk levels and institutions.

Withdraw Errors And Tax Effects

40% of Canadians make the mistake of taking money out of their RRSPs early, thinking it's necessary for things like paying off debt or covering living expenses. However, they soon realize that these early withdrawals have consequences.

The initial withholding tax is decided based on the following rates:

It is a 10% for withdrawals up to $5,000. If the amount is between $5,001 and $15,000, then it is 20% for withdrawals. After that, it would be 30% for withdrawals if it exceeds more than $15,000. Apart from the withholding tax, the withdrawn amount is added to your yearly taxable income. If the withheld tax is lower than your marginal tax bracket, you will need to pay the remaining tax when filing your taxes at the end of the year.

You can even get a free credit score and an understanding of high-interest savings accounts using the links.

The Tex Protection Compound Effects

The compounding of earnings in your RRSP is protected from taxes until you withdraw the money. Once you make a withdrawal, you lose the benefit of tax-sheltered compounding. Even a small withdrawal from your RRSP can have a significant impact on the long-term value of your savings due to the effects of compounding. For example, if you withdrew $6,000 from your RRSP today, in 25 years, you would have over $32,000 less in your RRSP compared to if you hadn't made that early withdrawal (assuming a consistent 7% annual return).

Lost To Contribution

When you withdraw money early from an RRSP, you lose the contribution room that you used to make your initial deposit. Unlike a Tax-Free Savings Account, you cannot re-contribute the amount you withdrew to your RRSP in the future. This reduces the potential value of your RRSP when you retire.

Making Your Cashflow Alot Easy To Circulate

Generating your retirement income can be a bit overwhelming. When you retire, doctors often receive income from various sources such as RRIFs, TFSAs, government pensions, and even dividends from their corporation if they have one. It can be quite complex to create a retirement income stream from all these different savings.

Throughout your retirement, you'll need to carefully balance withdrawals from each of these sources, considering the tax consequences and withdrawal requirements for each. If you have a spouse or partner, you must include their accounts and withdrawals in your overall retirement income plan.

Consolidating your RRSP assets with one financial institution can make managing your retirement income much simpler. By having all your RRSP withdrawals come from a single institution, you can streamline the process. Since determining which accounts to withdraw funds from is already complicated, taking the opportunity to simplify can be highly beneficial.

The Pros and Cons Of Multiple RRSP Accounts

There are many pros and cons to having many RRSP Accounts for yourself, and they will be discussed below.

Pros

You will get more investment options. This is when you have more accounts, and you might get better overall investment options like better interest rates for Stocks. You get a better stockbroker due to the potential investment funds you have for yourself. Not only that, but also the following

  • Exchange-traded funds (ETFs) and mutual funds

  • Guaranteed investment certificates (GICs), high-interest savings accounts, and bonds

If you prefer to have just one RRSP, you'll have to stick with one company forever, or you'll have to transfer your old account every time you open a new one. For some people, transferring accounts can be a hassle and complicated.

Different accounts in different financial institutions may give different interest rates. This means every other financial institution has different policies and often different interest rates. The different accounts can indicate that different interest rates can have different effects on interest rate income. A bank with a better policy interest rate will lead to a better interest rate and might as well transfer future fund contributions to that RRSP account.

Cons

If you're regularly adding money to a spousal RRSP, but your spouse is the one taking out the funds, it's important to consider the timing. Depending on when the withdrawal happens, some or all of it may be added to your taxable income, not your spouse's. This could lead to extra taxes for your family if you're in a higher tax bracket than your spouse. This will lead to future issues and problems to deal with.

It becomes a challenging thing when dealing with multiple RRSP accounts. The main drawback is that many accounts need to be managed and looked after. This can lead to confusion, and even the numeric information can be jumbled up if there is more than one RRSP account. This can cause issues in the long run, and no matter how many more accounts are, their contribution is limited at the end of the day.

Different accounts can negatively affect your investment. This happens because when your RRSPs are spread out among different accounts and financial institutions, it can affect important factors like investment timeline and risk tolerance. As you get closer to retirement, you'll have less time to bounce back from any setbacks in your investment plan. Bringing all your RRSPs together in one place, so to speak, will make it simpler to stay focused on your investment strategy and achieve your retirement goals.

Another thing to consider is that you might end up paying higher fees if you keep old accounts open. If you had a financial advisor or planner in the past, you might still be paying their fees on those old accounts. Additionally, new investment options are introduced each year at lower costs, so transferring your old accounts can help you save more money. But that is if the financial advisor is willing to accept the change and if the option is available during the time of change.

There are ways you can avoid taxes

Ways To Avoiding

There are two ways you can avoid paying taxes legally and smartly when you withdraw the amount from the RRSP account at retirement age and time. But doing it with many accounts will require time and energy

1. The Home Buyer's Plan

It is a program that allows you and your spouse to borrow up to $35,000 from each of your RRSPs to build or buy a home. However, there are a few conditions that need to be met. Firstly, neither you nor your spouse should have owned a home in the past five years. Additionally, all the amounts borrowed must be repaid to your and your spouse's RRSP within 15 years.

2. Lifelong learning plan

On the other hand, the Lifelong Learning Plan is designed to assist with the education expenses of you or your spouse/common-law partner (excluding your child). This means you can learn things, avoid paying taxes, and get back your money after ten years of payment.

Conclusion

It is important to have an RRSP account as it is beneficial for Canadian citizens who want to have a retirement plan and plan for their futures. It has a contribution-type system, which means the owner of the RRSP can deposit a limited amount in their RRSP account per month. There are no limits as to how many RRSP accounts you want to create. However, the contribution would still be limited, and this can lead to many questions and many things. It has its pros and cons and a way to avoid tax legally, but it would be difficult if there were more than one account.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!
logo.koho

Company

AboutAffiliatesCareersCommunity DiscountsCultureEnterpriseLearnNewcomersTravelStatusStudent & Graduate Discounts

Connect

The KOHO Mastercard® Prepaid card is issued by KOHO Financial Inc. pursuant to license by Mastercard International Incorporated. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated.

By using this website, you accept our Terms and Conditions. Follow these links for more information on our Privacy Policy and Accessibility Policy. © 2024 KOHO Financial Inc.