Are you ready for a self-directed RSP?

Think back to the very first time you contributed to a registered Retirement Savings Plan (RSP). It was probably a simple saving-type account. Then, as you accumulated cash, you may have purchased a GIC RSP. As you became more sophisticated, you probably added one or more mutual fund RSPs, to begin exploring the opportunities of the stock and bond markets.

That's the path most Canadians follow with their RSPs - simple cash to start, gradually moving into more sophisticated investments.

At some point, you may want to make the move to a single RSP that can hold all these types of investments - and more. You might be ready to take control with a self-directed RSP.

To find out more, click through the links below:

What is a self-directed RSP?
The advantages of a self-directed plan
Is it right for you?

What is a self-directed RSP?

A self-directed RSP is not an investment, per se. It's more like a way of investing.

Think of it as a tax-sheltered container into which you can put a number of different investments, including:

  • Canadian, U.S., and international stocks.
  • Mutual funds.
  • Federal, provincial, and corporate bonds.
  • Stripped bonds and coupons.
  • Mortgages and mortgage-backed securities.
  • GICs and Canada Savings Bonds.

Up to 30% of the plan's book value can be in non-Canadian holdings. ("Book value" is the cost at purchase, or when the investment went "on the books.")

Did you know? You can hold your own mortgage in your RSP. It must be set up as a legitimate "arm's-length" arrangement, however, and at current market rates. In addition, the mortgage must be insured under the National Housing Act.

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The advantages of a self-directed plan

So, why would anyone want a self-directed plan in the first place? Consider the following benefits:

More diversification. With a self-directed plan, you can hold any qualifying investment you want. You're not limited to one type of asset, such as GICs, or to the products of just one institution.

Control. You call the shots. You can take on as much risk, or as little, as you want.

More foreign content. The 30% foreign-content limit applies to each plan. If you have a number of Canadian-content-only plans, such as GICs, bringing them under a self-directed umbrella may increase your total book value and allow you to add to your foreign content.

Easier monitoring. With all your registered assets in one place, you'll get one statement. It's easy to see at a glance how your portfolio is doing and to calculate your current asset mix and foreign content

Of course, there's a cost to all these benefits - in the form of an annual administration fee. Typically, these run from about $25 to $125.

Tip: Many institutions will waive the self-directed RSP administration fee provided you maintain a minimum balance in the account (usually $15,000 or $25,000).

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Is it right for you?

If you answer yes to one or more of the following questions, you might want to consider a self-directed RSP.

  • I want to hold mutual funds and GICs from a number of different issuers in my RSP.
  • I want to hold stocks and bonds in my registered plan, as well as cash and mutual funds.
  • I want to make my own investment decisions. I want to be able to monitor and track my portfolio myself so I always know exactly how I'm doing.
  • I have a number of different RSPs that I'd like to consolidate into one. That way, I'll need to review only one statement instead of a mittful.
  • I want to take full advantage of the 30% foreign-content limit.
  • I am comfortable paying the annual administration fee, or I can maintain enough assets in my account that the administrator will waive the fee.

Tip: "Self-directed" doesn't necessarily mean "self-managed." You can set up a self-directed plan with a full-service broker if you want ongoing investment advice. Just remember that the commissions and administration fees will probably be higher.

Scotiabank

Want help determining the investment mix that's right for you? The Scotia Investment Selector® is an easy-to-use online investment tool that will help you allocate your assets across the three asset classes - and provide you with some suggested investment products for your portfolio.

For help in making the most of your RRSP, click here to visit our RRSP Solutions Centre. Or call 1-800-575-8888 to find out more about Scotiabank's investment assistance. 

And, if you're ready to take advantage of your unused contribution room, Scotiabank's RRSP Catch-up Line of Credit or Loan could be the solution for you. Find out more by clicking here.

 

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