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Master your retirement with a self-directed RRSP

Money.ca / Money.ca

Noel Moffatt

By Noel Moffatt

🗓️

Updated: November 20, 2024

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A self-directed RRSP puts you in the driver’s seat, giving you the freedom to invest in stocks, bonds, real estate and more. Unlike traditional RRSPs with limited choices, this option lets you build a personalized strategy that matches your unique financial goals.

Key takeaways

  • A self-directed RRSP offers individuals full control over their investment choices, enabling personalized strategies that align with financial goals
  • The benefits of a self-directed RRSP include tax advantages, investment flexibility across various asset classes and the potential for higher returns compared to traditional RRSPs
  • Managing a self-directed RRSP requires significant time, knowledge and awareness of fees and market risks, making it essential for investors to assess their commitment and expertise

What is a self-directed RRSP and how does it work?

Think of a self-directed RRSP as the ultimate DIY retirement account. You get to pick your investments — whether that’s stocks, ETFs, GICs, mutual funds or even real estate. Unlike the cookie-cutter approach of traditional RRSPs, this one gives you total control and flexibility to build a portfolio that matches your goals and risk tolerance.

You can go full-on solo and manage it yourself or get some backup from a brokerage or robo-advisor. Either way, the account is hosted by a financial institution, which takes care of the boring admin stuff such as registering the plan and handling trades.

Tax advantages and contribution rules

Self-directed RRSPs provide tax benefits, such as tax-deductible contributions that lower your taxable income and tax-deferred growth on investment earnings. 

Because contributions are tax-deductible, this means you’ll lower your taxable income while letting your investments grow tax-free until retirement. But there’s a catch — there’s a contribution cap. For 2024, it’s the lower of 18% of your last year’s income or $31,5601. 

Missed a year? No worries — your unused room rolls forward, so you can catch up later.

How to set up a self-directed RRSP

Getting a self-directed RRSP up and running is easier than you might think. Here’s a step-by-step guide to help you get started:

First, decide where you’ll open your self-directed RRSP. Options include big banks like TD and BMO or online platforms such as Wealthsimple and Questrade. When choosing, weigh factors like fees, investment options and the quality of customer support.

To set up your account, you’ll typically need:

  • A government-issued ID (e.g., driver’s license or passport)
  • Your Social Insurance Number (SIN)
  • Banking details for your initial deposit
  • Proof of income or employment (if requested)

Most institutions require an initial deposit to open the account. Here’s what you can expect:

  • Wealthsimple: No minimum deposit
  • Questrade: $1,000 minimum deposit to get started
  • TD and BMO: Minimum deposits vary depending on the account type

Choose the level of support that fits your needs:

  • Full-service brokers: Perfect if you’d like professional advice, though they often come with higher fees
  • DIY platforms: Best for confident investors who want complete control at lower costs. Platforms like Questrade and Wealthsimple are great for hands-on management.

Once your account is active, it’s time to select your investments. Build your portfolio based on your saving and investment goals2 and your risk tolerance, choosing from stocks, ETFs, GICs or even real estate.

Stay on top of RRSP contribution rules to avoid penalties. For 2024, the annual limit is $31,560 or 18% of your prior year’s income — whichever is lower. Many financial institutions offer tools to help you track your contributions and monitor your account’s performance.

By following these steps, you’ll be well on your way to setting up a self-directed RRSP, giving you the flexibility and control to grow your retirement savings while enjoying significant tax benefits.

Best self-directed RRSP accounts in Canada, Compared

Category TD Direct Investing BMO InvestorLine Wealthsimple
Account types RRSP, TFSA, cash, margin RRSP, TFSA, RESP, RRIF, cash RRSP, TFSA, LIRA, personal
Fees $9.99/trade (stocks/ETFs); Options: +$1.25/contract $9.95/trade, free for select ETFs $0/trade (stocks/ETFs); FX fee: 1.5%
Investment options Stocks, ETFs, GICs, bonds, real estate Stocks, ETFs, GICs, bonds, options Stocks, ETFs, crypto, fractional shares
Best for Research-driven investors and active traders Beginner to experienced DIY investors Commission-free and beginner-friendly investors

TD Direct Investing

TD Direct Investing logo
Features:
  • Offers robust research tools, real-time quotes and market insights
  • Wide variety of accounts, including RRSPs and TFSAs
  • Access to advanced trading platforms like TD Advanced Dashboard
  • Partial shares trading available

Fees:

Stocks/ETFs: $9.99/trade for standard traders; $7 for active traders

Options: $9.99 + $1.25 per contract

Free mutual fund trades

Best for advanced traders: TD Direct Investing offers robust tools, research and flexibility for seasoned investors

Pros

Pros

  • Comprehensive investor education and resources

  • Advanced tools for experienced traders

  • Transfer fee reimbursement (up to $150)

Cons

Cons

  • Higher fees compared to Wealthsimple

  • Steeper learning curve for new investors

BMO InvestorLine

BMO InvestorLine logo
Features:
  • Free trading on select Canadian ETFs
  • Offers a 5-Star program for advanced traders with premium tools
  • ESG insights and customizable analysis tools
  • No minimum balance required to open an account
  • Fees:
  • Stocks/ETFs: $9.95 per trade
  • Options: $9.95 + $1.25 per contract
  • No annual fees for accounts above $25,000 (registered) or $15,000 (non-registered)
  • Best overall platform: BMO InvestorLine balances features, affordability and accessibility for all investor levels
Pros

Pros

  • Great for ESG-focused portfolios

  • Accessible research and support tools

  • Beginner-friendly interface with advanced options for experienced users

Cons

Cons

  • Limited perks for accounts with smaller balances

  • Higher fees than Wealthsimple

Wealthsimple self-directed investing

Wealthsimple logo
Features:
  • Commission-free trades on stocks and ETFs
  • Instant deposits up to $50,000 (higher for Premium clients)
  • Fractional share trading and extended market hours
  • Offers crypto trading and staking
  • Fees:
  • Stocks/ETFs: $0/trade
  • Options: $2/contract (Core), $0.75/contract (Premium)
  • Currency conversion: 1.5% for non-USD accounts
  • Best for value: Wealthsimple is ideal for commission-free trading with a beginner-friendly interface
Pros

Pros

  • No commission fees

  • User-friendly interface for beginners

  • Automatic dividend reinvestments and recurring investments

Cons

Cons

  • Limited research and tools compared to TD and BMO

  • High FX fees for USD trades unless using a USD account

Fees to watch out for with self-directed RRSPs

Managing an RRSP isn’t free — fees can sneak up and eat into your returns over time. Here’s what to keep an eye on and how to minimize costs:

  • 1. Annual administration fees

    +

    There are some financial institutions that charge an annual fee just to maintain your RRSP.

    Example: $100-$200 annually for certain registered accounts

  • 2. Trading fees

    +

    These fees apply whenever you buy or sell stocks, ETFs or other assets.

    Example: $9.99 per trade at big banks vs. $0 at Wealthsimple

  • 3. Management Expense Ratios (MERs)

    +

    These fees are charged by mutual funds or ETFs, MERs are expressed as a percentage of the fund's assets.

    Example: Active mutual funds often charge 2%+, while low-cost ETFs are usually under 0.5%.

  • 4. Currency conversion fees

    +

    If you trade US stocks in a Canadian account, you’ll typically pay conversion fees.

    Example: 1.5%-2% per transaction.

  • 5. Withdrawal or transfer fees

    +

    Financial institutions may charge fees to close or transfer your RRSP.

    Example: $150 per transfer or closure.

    Related: How to transfer brokerages

  • 6. Hidden fees

    +

    Some brokerages promote proprietary funds with embedded fees that can quietly chip away at returns.

    Tip: Always review the fee structure of any investment before committing.

By understanding and minimizing these fees, you can protect your returns and maximize your RRSP’s growth.

How fees impact long-term returns

Fees aren’t just numbers — they directly impact how much your investments can grow over time. For example:

Investing $100,000 over 30 years at a 6% return:

  • With 2% fees, your portfolio grows to $320,000
  • With 0.5% fees, your portfolio grows to $570,000

This results in a $250,000 difference over 30 years due to fees. Keeping costs low lets more of your money stay invested and compounding over time.

Strategies to minimize fees

  • Use low-fee ETFs: ETFs often have MERs below 0.5%, much cheaper than mutual funds
  • Opt for discount brokerages: Platforms like Wealthsimple or Questrade offer $0 trading fees
  • Hold USD investments in USD accounts: Avoid currency conversion fees by using a USD account
  • Consolidate accounts: Larger account balances can help waive administration fees.

A self-directed RRSP mortgage lets you use the money in your RRSP to fund your own mortgage for a residential or commercial property. Essentially, you’re playing both roles — lender and borrower — by using your RRSP funds to finance your property purchase.

Here’s how it works:

  • Your RRSP funds are transferred to a trustee who manages the mortgage for you
  • The mortgage must meet CRA rules, which include being insured by CMHC3 or a private insurer
  • You make repayments — principal and interest — back into your RRSP over time

This setup is a win-win: You’re financing a property while generating a steady stream of income within your RRSP. It’s a creative way to put your retirement savings to work for you today.

Real world example:

John has $150,000 in his self-directed RRSP and wants to purchase a rental property. Instead of going through a traditional bank for a mortgage, he taps into his RRSP and becomes his own lender. 

The best part? 

The interest payments he makes go straight back into his RRSP, boosting his retirement savings while he builds equity in the property.

Pros and cons of self-directed RRSP mortgage

Pros

Pros

  • Earn interest on your own mortgage: Instead of sending interest to a bank, you pay it back into your RRSP, growing your retirement savings.

  • Diversification: Investing in real estate adds another layer of diversification to your portfolio.

  • Control over investments: You have the ability to set and manage your mortgage terms and payments.

  • Potential tax advantages: Interest payments grow tax-deferred within your RRSP, maximizing long-term benefits.

Cons

Cons

  • Higher setup fees: Costs for CMHC insurance, trustee services, and legal fees can add up.

  • Strict CRA rules: You’ll need to comply with CRA requirements, including obtaining insurance and ensuring fair market terms.

  • Default risk: If you default, you could face penalties and jeopardize your retirement funds.

  • Opportunity cost: Funds used for the mortgage aren’t available for other investments, which might reduce your portfolio’s growth potential.

Managed RRSP vs. self-directed RRSP: Which is better for you?

Deciding between a managed RRSP and a self-directed RRSP really depends on your financial goals, your comfort level with investing, and how much time you’re willing to put into managing your portfolio.

Features Managed RRSP Self-directed RRSP
Control Professional manages investments You have full control over investments
Flexibility Limited to pre-selected mutual or index funds Access to a broad range of assets like stocks, ETFs, and real estate
Fees Higher fees (e.g., MERs of 1.5%-2%+) Potentially lower fees with low-cost ETFs
Effort required Minimal — advisor makes decisions Requires time, research, and management
Best for Passive investors seeking convenience Hands-on investors who want control
Links to check out Edward Jones review Best trading platforms

Related: Best robo advisors — let a robot do the work for you for fewer fees than a financial advisor

Who should choose a managed RRSP?

Managed RRSPs are a great fit if you:

  • Prefer a hands-off approach: You like someone else making the investment decisions
  • Are a beginner: You’re just starting out and need professional guidance
  • Have limited time: You’re busy and can’t dedicate time to managing your portfolio

Who should choose a self-directed RRSP?

Self-directed RRSPs are better suited for those who:

  • Have experience: You understand markets and know your way around investments
  • Enjoy being active with investments: You like researching and making your own decisions
  • Are comfortable with risk: You’re okay with taking on market risks for potentially higher returns

When to use a self-directed RRSP

Consider going self-directed if:

  • You want to invest in a mix of assets like stocks, ETFs, bonds or real estate
  • You’re confident in your knowledge and have time to research and manage your investments
  • You want more control over how your money is allocated

Tips for transitioning from a basic RRSP to a self-directed RRSP

  • Choose the right platform: Look into options like TD Direct Investing, BMO InvestorLine or Wealthsimple. Compare fees, tools, and investment options
  • Open your new account: Ensure your self-directed RRSP is ready to go before transferring funds
  • Initiate a transfer: Request a direct transfer from your current RRSP provider to avoid taxes. Most providers make this process easy
  • Research investment options: Take time to plan your portfolio and decide which assets you want to hold
  • Monitor your contributions: Stay within your annual RRSP limit to avoid penalties

FAQs

  • What is a self-directed RRSP?

    +

    A self-directed RRSP offers you greater control over your investment choices within a registered retirement savings plan. This allows you to manage your own portfolio and invest in a diverse array of assets, such as stocks, bonds and real estate.

  • What are the tax benefits of a self-directed RRSP?

    +

    The tax benefits of a self-directed RRSP include the ability to make tax-deductible contributions, which lowers your taxable income, and the advantage of having investment earnings grow tax-deferred until withdrawal, potentially maximizing growth over time.

  • What types of investments can I hold in a self-directed RRSP?

    +

    You can hold a variety of investments in a self-directed RRSP, including stocks, bonds, mutual funds, ETFs, and real estate. This variety allows for a diversified portfolio that aligns with your financial objectives and risk tolerance.

  • What are the drawbacks of a self-directed RRSP?

    +

    A self-directed RRSP necessitates considerable time and expertise to manage effectively, alongside potential fees and market risks that could result in financial losses. Therefore, it demands a well-informed and dedicated approach from the investor.

  • How can I manage my self-directed RRSP effectively?

    +

    To effectively manage your self-directed RRSP, regularly review and adjust your investments while utilizing online tools for tracking and analysis. It is also advisable to avoid high-fee investments and consider seeking guidance from financial advisors to help navigate the complexities involved.

  • Sources

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    1. https://www.nbc.ca/personal/savings-investments/rrsp/maximum-contribution.html

    2. https://www.canada.ca/en/financial-consumer-agency/services/savings-investments/saving-goals-worksheet.html

    3. https://www.cmhc-schl.gc.ca/

Noel Moffatt Writer

Noel Moffatt is a Canadian fintech expert with a passion for simplifying personal finance. Based in St. John’s, NL, he draws on his background in finance, SEO, and writing to deliver clear explanations and actionable advice. Noel is dedicated to equipping readers with the knowledge and tools they need to make informed financial decisions, striving to make personal finance more accessible and understandable through his in-depth articles and reviews.

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