Explaining RRSP Eligible Investments

What are RRSP-Eligible Investments?  

What investments are RRSP-eligible? 

RRSP-eligible investments are investments you can hold within your Registered Retirement Savings Plan (RRSP)

An RRSP is a type of personal savings plan registered with the Canadian federal government. You can contribute to this throughout your working years and accumulate funds to be used when you retire. 

By placing your income in investments within your RRSP, you invite the potential for it to grow. 

One of the benefits of doing this through an RRSP account is that these investments are tax deferred. You don’t pay tax on income earned through your RRSP investments until you retire or withdraw funds from the RRSP account, the taxes payable are then calculated based upon your current marginal tax rate at time of withdrawal.  

For individuals earning an income during their working years, you will likely be in a higher marginal tax bracket, so it makes sense to set aside savings in your RRSP account, invest it on a tax deferred basis, then withdraw it in your later years (such as when you have retired) in a lower tax bracket. 

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What Investments are RRSP-Eligible? 

Certain investments can be held within your RRSP. Eligible investments for RRSP include the following qualified investments:

CRA RRSP Eligible Investments:

  • Stocks
  • Bonds
  • Options
  • Mutual funds
  • Exchange-traded funds (ETFs)
  • Savings deposits
  • Treasury bills
  • Guaranteed Investment Certificates (GICs)
  • Some RESPs

What makes an investment “qualified”? 

The Canada Revenue Agency (CRA) decides which investments you can place within your RRSP. Generally, investment grade securities traded on a designated stock exchange, such as one in Canada, are recognized. Canada’s Finance Department assesses which stock exchanges are deemed Designated around the world. 

A foreign stock exchange such as the New York Stock Exchange counts, as well as about 46 other global exchanges. These include the Toronto Stock Exchange (TSX), NASDAQ, the London Stock Exchange, for example.

Explaining RRSP Eligible Investments

RESPs/RRIFs in Relation to RRSPs

In specific cases, RESP funds up to $50,000 can be placed in your RRSP. 

Your RESP must have been in existence for a minimum of ten years, and all beneficiaries must be 21 years old or older, and not pursuing higher education. If you don’t transfer your unused RESP money to an RRSP, you will be charged special tax on the interest earned from funds in the plan, plus an added 20%.

You can have an RRSP and a Registered Retirement Income Fund (RRIF) at the same time up until you turn 71. At this point, you must convert your RRSP to a RRIF, or some other form of retirement income. 

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Some types of investments are not allowed to be held within your RRSP.

Prohibited investments that cannot be held within an RRSP, at risk of penalty as per Canada’s income tax folio include:

Ineligible RRSP Investments: 

  • Direct land
  • Employee stock options
  • Business investments in small business
  • Commodity futures
  • Investments/stocks within a private company in which you are a designated shareholder
  • Personal assets (jewelry/art)
  • Precious metals
  • Bonds issued by a wholly owned subsidiary whose shares are not publicly traded
  • Naked put and call options
  • Mortgage loans on a commercial property that’s owned by a relative
  • Bonds and debentures issued by companies with shares listed on a designated foreign stock exchange, even in cases where the company’s shares are eligible

To build investments RRSPs, contact nearby financial institutions.

 A bank or credit union can assist with making deposits of money into an RRSP, and both have a similar obligation to provide you with the most recent information.

eligible investments for rrsp

Ensuring Your RRSP-Eligible Investments are CRA Qualified 

Your banking or trustee institution can administer your RRSP for a fee. 

Professionals can advise you on which investments to include, annual contribution limits, deadlines, and more. You may also choose to self direct your RRSP. This means you determine which self directed RRSP eligible investments to place within your RRSP and control all decisions. 

In some ways, a self-directed RRSP can provide you with increased freedom and control of your finances, if you are dedicated to researching your decisions thoroughly. 

When determining eligible investments for RRSP, as stated above, you need to ensure what you choose is approved by the CRA. With rrsp eligible investments private companies promote such as securities, you must ensure what you select is traded on at least one global stock exchange that has been deemed a Designated Stock Exchange by Canada’s Finance Department. 

When searching for RRSP eligible investments CRA online, you can find a list of Designated Stock Exchanges on the Government of Canada’s website. Click and scroll down to find an alphabetized list of all Designated Stock Exchanges. Included exchanges are those within Canada, Europe, Brazil, Australia, New Zealand, parts of Asia, Jamaica, Bermuda, and South Africa. 

Getting Help with Your Eligible RRSP Investments 

At Fundscraper, we help you get to the most out of your RRSP investments. 

Many people are unaware it’s possible to invest in mortgages, private mortgage investment corporations, mortgage trusts and mutual fund trusts that focus on real estate assets, within your RRSPs. Private real estate can present an opportunity for diversification and capital growth. Our team takes into account your investment portfolio, experience, tolerance for risk, and needs and expectations to find the appropriate products for you to consider. 

In a few simple steps you can set up a self-directed RRSP to get started. 

Contact us today to learn more. Grow your future nest egg!

The EMD – The Layperson’s Guide for Everyday Real Estate Investing

Introduction to the Exempt Market Dealer

Many Canadians are keen to invest in real estate-backed securities. 

After all, Louis Glickman, the renowned American investor and philanthropist famously said: 

“The best investment on earth is earth.” 

Yet often all the bureaucratic and complicated legal protocols hold us back. 

This article intentionally avoids arcane legalese and references to specific provisions of statutes and regulations, policies, bulletins and adjudicated cases. That’s right, there will be no long explanations of what a national instrument 45-106 prospectus, national instrument 31-103 or 45-106 prospectus and registration is.

Instead, the intent is to explain in understandable language how a layperson can best participate in real estate investing using an Exempt Market Dealer (“EMD”) to a meaningful advantage.

A Background on Exempt Market Dealers

It’s important to understand the basic background related to the regulated Canadian securities investment landscape

Start with the fact that interests in real estate are considered “securities”. 

Securities legislation and regulators across Canada are increasingly looking to implement appropriate levels of consumer protection measures, especially since the financial crisis of 2007-2008. 

Typically, companies who offer stocks, bonds, mutual bonds and the like in the publicly traded capital market are required to prepare a disclosure document called a “prospectus” and have it precleared by a securities regulator like the Ontario Securities Commission (the “OSC”) before going public. 

However, there are some important prospectus and registration exemptions, one of which is where there is an offering memorandum (“OM”) detailing all the material facts to assist prospective purchasers in their decision whether to invest in the securities being offered by an issuer. An OM is similar to a prospectus but need not have the regulator’s prior sign-off.  

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It is this OM Exemption that gives birth to alternative investments exempted from the rigours of a prospectus and brings into play an Exempt Market Dealing representative, all within what is called the Exempt Marketplace

Exempt Market Dealer

Examining the Exempt Market Dealer

The Exempt Market Dealer is the vehicle that facilitates your purchase of real estate-backed securities in the Exempt Marketplace. 

An Exempt Market Dealer is a fully registered government-regulated securities dealer who acts as a dealer to distribute prospectus-exempt securities to qualified investors. Those include various categories of investors, defined by prescribed income and asset tests and investment limits. An exception is made for so-called “accredited investors” where investments and investment funds are not capped. 

The criteria for determining where you fit in can be complex and is beyond the scope of this paper, but suffice it to say, the Exempt Market Dealer will figure it out as part of their “Know Your Client” (“KYC”) obligations.

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This means collecting salient information about a client’s complete financial circumstances, investment objectives and risk tolerance. Importantly, any Exempt Market Dealer in Canada must ensure the exempt market security is “suitable” for the investor. 

For example, an elderly investor’s proposed investment of 90% of their wealth into a risky long-term real estate play is “unsuitable” and in the ordinary course must be rejected by the Exempt Market Dealer.

Why Choose Fundscraper as Your Exempt Market Dealer?

Fundscraper Capital Inc. (“FCI”) is Canada’s premier online platform for real estate investing. FCI is registered on the Exempt Market Dealer List as an Exempt Market Dealer with the Ontario, British Columbia, Alberta, Quebec, New Brunswick, and Prince Edward Island Securities Commissions.

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As such, FCI files regular reports to and is subject to periodic audits by regulators. It meets government requirements for operating capital (such as mutual funds) and must make timely reports to clients.

What sets FCI apart?

  • An informative, easy-to-navigate website www.fundscraper.com
  • Modern technology and best of practice compliance standards.
  • A marketplace with a wide variety of product offerings by proven issuers for the most conservative risk-averse investors to those more adventuresome.
  • In addition, we offer Fundscraper Property Trust sponsored investment opportunities, which qualify for investments by Registered Funds, like RRSPs, RIFFs, and TFSAs. 
  •   A comprehensive dashboard that keeps you informed in real-time of the status of your investments handled by FCI.
  • Concierge services by knowledgeable Dealer Representatives, all of whom have completed extensive training and licensing requirements of the OSC.
  • FCI’s senior management and Board of Advisors are comprised of seasoned experts in real estate development, finance, private equity, law and technology. 
  • FCI’s track record includes 7500+ registered members of its community, 10%+ in earned net annualized return since it launched in 2017 and $420 million in capital placed in real estate projects across North America. 

Conclusion on Exempt Market Dealers

Don’t bother taking an Exempt Market Dealer course. Instead, engage Fundscraper and make us your trusted ally by joining the Fundscraper community of investors.

What is LIF?

Having the funds you need to support yourself in retirement is key to sustaining your quality of life after work. There are various ways you can fund your retirement in Canada, one of them being via a LIF. 

But what is a LIF? How does a LIF work, what can be placed in it, and how are funds taken out?

In this article, we will answer all of those questions and more.

What is a LIF? (LIF Meaning) 

A Life Income Fund (LIF) is a type of registered retirement income fund (RRIF) available in Canada. This type of fund can be used to hold locked-in pension funds and other assets for retirement. 

Some important characteristics of a LIF include the fact that:

  • LIF funds CANNOT be withdrawn in one lump sum
  • LIF funds ARE creditor-protected
  • In many cases, you MUST be of early retirement age to begin receiving LIF funds (55 years old)
  • You CAN choose your LIF investments
  • LIF contributions grow TAX-DEFERRED
  • There ARE legal limits to how much you can contribute/withdraw
  • You MUST start receiving LIF payments AFTER you turn 71
  • You NEED your spouse’s consent to set up a LIF as per pension legislation

LIFs are offered by institutions across Canada. Once funds are withdrawn from a LIF, they are subject to income tax. 

What is LIF?

The Meaning of LIF in the Investment Context 

The meaning of a LIF in an investment context is broad. 

Many jobs in Canada include a registered pension plan. Once you reach retirement, the lump sum value of your vested contributions to your pension plan, plus interest, must be unlocked in order to access the funds. 

How can you do this? Each province has an age at which you can begin to withdraw money from your pension. You can unlock your pension by converting the funds into a LIF, a locked-in retirement income fund (LRIF), a Locked-in Retirement Account (LIRA) also known as a locked-in Registered Retirement Savings Plan (locked-in RRSP), a Locked-in Retirement Savings Plan (RSP) or a Restricted Life Income Fund (RLIF). 

You may also unlock your pension by purchasing a life annuity

Your LIF can hold many types of investments including:

  • Cash
  • Securities listed on a designated stock exchange
  • Mutual funds
  • Corporate bonds
  • Government bonds
  • ETFs

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With your pension funds in a LIF, you can continue to grow your money while accessing it for life needs, over time. Depending on your province, you may have to purchase a secure guaranteed income in a life annuity at a certain age to use the money remaining in a LIF. This depends on where you live, however.  

In addition, if you live in Quebec, Nova Scotia, or Newfoundland and Labrador, you may qualify for something called temporary income as described by Sun Life.

With a LIF, you can control your investments, maximize your tax deferral and name a beneficiary as a recipient of your funds following your death. 

As a positive progression for your pension, a LIF presents a responsible way of dealing with pension income with the potential for growth over time. 

What is LIF: Understanding Withdrawal Amounts 

Why choose to place your pension in a LIF? 

With a LIF, as with other registered products, your contributions are allowed to grow tax-deferred when kept within the fund. In this way, a LIF can keep your investment retirement earnings tax-sheltered. 

You keep more money! In addition, LIF funds are creditor-protected. And as one of many registered products accounts available in Canada, having your money in a LIF can help reduce your taxes

In some circumstances, you can withdraw funds from a LIF at any age as long as they are to be used for retirement needs. These might include situations of non-residence, financial hardship, a shortened life expectancy or having a small account balance if you are 55 or older. 

At the time of this article’s publishing, pensions in federal jurisdictions like Alberta, Manitoba, New Brunswick and Ontario can be withdrawn once in a lump sum. In most cases, however, you cannot withdraw from a LIF before the age of 55 and it must be done gradually.

Meaning of LIF

Understanding the Meaning of LIF: Maximum and Minimum Withdrawal Amounts

It’s important to know that there are normally certain maximum withdrawal limits and minimum withdrawal rules for LIFs. 

The amount you can legally withdraw each year from your LIF is a percentage of your total fund. This fluctuates annually. This percentage is disclosed in the yearly Income Tax Act as information applicable to all RRIFs. 

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So, how does it work? 

When you are ready to begin LIF withdrawals, you must specify how much you would like to take out at the outset of each fiscal year. The idea is that you withdraw funds within a certain limited range in order to receive lifetime LIF income. 

Many online platforms have useful LIF withdrawal calculators to help guide you through the process. 

Investing with Fundscraper  

As Canada’s leading private real estate investment marketplace, Fundscraper has customized investments to potentially match your desired income and investment targets

Our goal is to help everyday investors access a world of new wealth that has historically been available to only a small portion of the population. Our easy-to-access online platform allows you to start investing in real estate-backed securities with as little as $5000. 

Our team has helped process more than $420 million in investor capital into high-value real estate-secured investments. 

Join today. It’s time to get your money working for you to produce real results and enjoy the benefits of investing in real estate.

Fundscraper is currently only available to existing clients.

If you have any questions, email info@fundscraper.com and one of our team members will direct your inquiry.

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