As I’ve stated before, I am by no means a financial advisor. I don’t know nearly as much as I would like to about the more complicated aspects of money management. But I’d like to learn more, and I have an unprecedented set of circumstances that give me more opportunities to educate myself.

RRSPs: The Thing we are Supposed to All Invest In

I’ve heard the radio advertisements every year – “Make your RRSP contributions!” – but I never really understood how an RRSP would benefit me. In short, an RRSP lets you register an account, make contributions that help you save for retirement, and let you defer the taxes you would’ve paid on that amount. For example, if you earn $50,000 in 2021, and contribute $5,000 to your RRSP, you would pay taxes as though you earned $45,000 in 2021.

The RRSP has a couple of minor drawbacks. There are limits to the amount you can contribute (based on your annual income), and there are penalties and tax implications for withdrawing from the account prior to retirement.

Creating my RRSP

I recently opened two RRSP accounts (more on why later). I started out by going to the bank where I do my day-to-day banking. It was a seamless process, though if I am being honest I found the adviser I spoke with to be condescending.

My second account was created online, with another financial institution. I found this process considerably quicker and less an investment of time, particularly without the condescension of my first. While I may diversify when, where and how I invest, I certainly hope there are no commissions going toward someone who chose to talk down to me as soon as I signed the paperwork.

RDSP: Special Account for Special Expenses

Similar to an RRSP, an RDSp is a registered long-term savings account for people with disabilities. Eligibility is confirmed by the Canada Revenue Agency, based on the ability to claim the annual Disability Tax Credit. The contributions you make to the account grow tax-free, and can receive matching government grants. In addition to that, depending on your family income, you may be able to apply for and receive government bonds. Both of these can provide ways for long-term savings to grow exponentially. Like an RRSP, withdrawals and interest – in addition to the government grants and bonds – are taxable upon withdrawal. There is a lifetime contribution limit of $200,000, regardless of your annual income. And if you withdraw from the RDSP so that the government grants and bonds are withdrawn within ten years of the contribution, that money needs to be paid back. but since my current goal is long-term saving, I don’t have any concerns – at least right now – of touching my recently opened account.

Opening My RDSP

I first asked the financial adviser at my day-to-day banking institution about setting up an RDSP. He didn’t seem to know how to set one up, even though when I made the initial appointment I indicated I wanted to set up an RRSP and an RDSP. I was sent away with a phone number to call during business hours. When I called the number, I asked what I needed to do to set up an RDSP. I was told I needed to fill out a form T2201, which is the form I filled out when I first applied for the Disability Tax Credit. So I needed to apply again for something for which I am already eligible? And send that to the bank?

Frustrated, thinking there was a better way, I went online and located another financial institution which had a dedicated line to create an RDSP. I called, and received some great information about what I needed, including a designated number for ESDC Canada who could provide some further clarity on what is actually needed. I created a new checking account and bank #2, then waited for my card. Once I got my new card – and read its numbers 100% independently with Lookout – I called the RDSP phone number again and got things rolling. I’m now just waiting for the paperwork to come so I can sign it, and my account will be open! I find it interesting how much simpler a process is when people who are supposed to know about parts of their job (like registered accounts) know about… registered accounts!

What’s next?

In short: I don’t know! I have time to decide what I want to do, and how I want to invest for my future. But I know more now than I did yesterday, and I know what I’m willing to accept as treatment from a business or an entity that I’m supposed to trust with my financial future.

What about you?

Do you invest? Do you find it thrilling, overwhelming, or something to be avoided? Where did you learn about registered accounts? Share your experiences in the comments below!