Don't assume that your money is safe just because it is in an Registered Retirement Savings Plan (RRSP). It depends on what happens. Here are three situations that may affect your RRSP savings.
Can I lose money on my RRSP investments?
It depends on which investments you choose. If you invest in stocks in your RRSP and the stocks go down in value, your RRSP account will also drop in value.
Tip: In general, the more equity investments you hold in your RRSP (such as stocks or equity mutual funds), the higher your risk of losses will be. The more investments you have that pay interest, such as bonds or Guaranteed Investment Certificates (GICs), the lower the risk of losing money.
Can I lose my RRSP savings if my financial institution goes bankrupt?
If this happens, you may recover your cash and investments, up to certain limits.
Is the money in my RRSP safe if I go bankrupt?
In most cases, only RRSP money invested in segregated funds is safe. With other investments, your RRSP could be a target for creditors if you declare bankruptcy. Only Prince Edward Island and Saskatchewan have enacted laws to protect RRSPs from creditors so far.
Good news could be on the way in the form of Bill C-55. This Bill proposes changes to the Bankruptcy and Insolvency Act (BIA). If passed into law, this legislation would exempt RRSPs and Registered Retirement Income Funds (RRIFs) from being liquidated on behalf of creditors in the event of bankruptcy.
Remember: RRSP accounts are not safe from investment losses
You have to manage your money carefully and choose investments with care.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.