Question about RRSP's?

I have an interview for TD easyline. It's your typical banking stuff, some sales...and I believe I may at times be having small discussions regarding some investments but mostly would be transferring them to the professionals. I had a question though, I'm sure it's basic about RRSP's...

I know that RRPS's are registered with the Canadian government and is a way to save money for the future. It's typically for retirement but could also be used for buying a house or education. I know that it is tax-deferred until you withdraw the funds, typically in later years when you fall under a lower tax bracket. I know they can be in the form of stocks, bonds, GIC's, mutual funds.

My dumb question is how it all works. You go to the bank and say you want an RRSP. You decide you're gonna choose mutual fund. You choose $1,000. You give the bank $1,000. The interest that is gained on this amount, is this coming from the bank or the government. I'm guessing it's the bank because this is money they could use, no? The government likes it because they can look into the future and plan better based on the fact that more people will have savings and not have to rely on social assistance?

2 Answers

  • George
    Lv 6
    7 years ago
    Favorite Answer

    An RRSP is a form of deposit at the financial institution. They pay interest, or if it is a mutual fund, it gets invested. In any case, the money earned in the RRSP is a transfer or payment from the place that took the deposit.

    They aren't registered with the government, but at the institution. The report the transactions to CRA through information slips. There's one that shows your contributions, and another for withdrawals.

    Yes, they were invented to help people save for their retirement.

    TFSA is sometimes a better option. The money going in is after tax, and there's no immediate reward. But anything earned is tax free. If you make regular contributions over a working life the income could be considerable.

  • 7 years ago

    Just to be clear, you're not giving the bank your money. You're depositing it there, but its YOUR money, in YOUR RRSP account. Just like the money in your chequing account is yours, not the bank's.

    If you decide to invest in a mutual fund, the mutual fund pays the interest/dividends, not the bank or government. Banks do offer many mutual funds, so if you choose a bank's mutual fund, such as the TD Money Fund for example, then it would technically be the bank that pays the dividend, through their mutual fund branch of business. But, depending on what kind of RRSP account you open (self-directed, eg.), you could buy any mutual fund you want from any company/bank. If you buy a Fidelity mutual fund inside your TD RRSP account, then Fidelity pays the interest/dividends. Similarly, if you bought stock in Suncor inside your RRSP, then Suncor pays the dividends, not the bank or the gov't.

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