Canada’s public pension system is intended to provide Canadians with a modest retirement income. The majority of Canadians will need personal savings on top of the public benefits they receive to retire comfortably.
You have several options when it comes to saving money for your retirement, including:
Interest rates on savings accounts are very low. In many cases, the interest you earn won’t be able to keep pace with inflation; over time, your money will slowly lose its buying power. See the impact of inflation for more information.
Savings accounts can be useful if you are looking for a simple, short-term way to protect your money. Money in a savings account can be accessed easily and if you aren’t concerned with growing your savings, a savings account might suit your needs.
However, you should keep in mind that a Tax-Free Savings Account can act the same way as a regular savings account can but can hold a wide range of investment types and can allow your savings to grow tax-free.
A non-registered investment is an investment that does not allow you to avoid or delay taxes—that is, you pay tax on your savings, and on the income you earn investing them.
Most financial experts will recommend that you save as much as you can in registered accounts. Only after you’ve contributed the maximum amounts allowed should you invest in non-registered savings and investments. This is because, more often than not, the tax benefits of accounts such as TFSAs and RRSPs will allow your savings to grow larger and faster than with non-registered savings and investments.
Keep in mind that you should not withdraw money from your RRSP before retirement unless necessary. This is because you will have to pay taxes on the entire amount you withdraw. For more information, see withdrawing from an RRSP.
You can choose from a wide range of investments and savings vehicles. See our section on types of investments for more information on different types of non-registered investments.