Self-Directed RRSPs: Rules and Options

Self-Directed RRSPs: What to Know

A self-directed RRSP, or SDRSP, gives you more control over your retirement savings by allowing you to invest in multiple assets within a single plan.

Registered retirement savings plans (RRSPs) are excellent tools to help you save for your future while enjoying tax benefits. Of the several types of RRSPs that exist in Canada, the self-directed RRSP, sometimes referred to as an SDRSP, will give you the most control by letting you pick the investments in your account.

Investing via a self-directed RRSP

Once you decide to open an RRSP through a financial institution or a brokerage, your next step is to choose a plan to invest in.

If you’re looking for simple approaches to RRSP investing, you can put your contributions in a GIC, a mutual fund account or an RRSP savings account.

If you like a more hands-on approach to financial planning and want to manage a mix of investments you choose yourself, a self-directed RRSP could be an ideal option.

What is a self-directed RRSP?

A self-directed RRSP, or SDRSP, gives you the freedom to control the types of assets in your plan. You can hold different kinds of investments in a single RRSP account. Instead of holding a single GIC, for example, you could hold a mix of income-generating assets like equities, GICs, mutual funds and ETFs.

You can also take an active role in managing your plan, as opposed to investing in a mutual fund RRSP managed by a professional fund manager. You can also choose to leave the management of your SDRSP up to a broker or robo-advisor.

Nerdy Tip: Both individual and group RRSP plans can be self-directed. Check with your employer or consult with a financial advisor to determine what’s available to you and best for your situation.

How an SDRSP works

As the holder of a self-directed RRSP, you’re in charge of which assets (such as stocks, GICs or ETFs) go into the account. You can manage those assets (buy, sell or hold them) as you see fit as long as you don’t break any contribution or withdrawal rules.

Don’t let the term “self-directed” scare you. SDRSPs don’t require you to go it alone — they can be entirely managed by a bank or brokerage. For example, you can open an SDRSP with a full-service investment brokerage. You then consult with a broker, who selects investments based on your goals and comfort with risk. The broker oversees the management of the account with as much or as little input from you as you’d like.

Another option is to use a robo-investing firm to manage your SDRSP. You may have to respond to an online questionnaire that gauges your risk tolerance and investing goals. Based on your answers, you’ll be matched with a specific portfolio of funds for your RRSP account. This self-directed RRSP option doesn’t provide the human interaction or hand-holding of a full-service firm, but it saves you money on fees.

More experienced investors who have the time and are confident enough to choose their own investments and balance their portfolios independently can opt for a self-directed plan with a do-it-yourself online brokerage.

How to open an SDRSP

You can set up a self-directed RRSP with a bank (usually via a bank’s full-service or DIY investment arm), an online brokerage or an online robo-advisor. With a bank, you may have the option to open an account in person or online. With an online brokerage firm, you’ll have to open your account online.

To open an SDRSP, you may need:

Proof that you are a resident of Canada and the age of majority in your province or territory.
A minimum initial investment.
An external bank account (for online-only investment brokerages).
Your Social Insurance Number, or SIN.

What to consider before opening an SDRSP

In addition to ensuring that you don’t exceed RRSP contribution limits, especially if you already have another RRSP, be aware of the following when deciding whether to go with a self-directed RRSP:

You could lose money: Nearly all forms of investment come with risk. If you hold assets like stocks or ETFs in your self-directed RRSP, the performance of your portfolio will be at the mercy of the markets. If the economy does poorly, the markets could decline and you could lose money.

Fees: SDRSPs usually come with fees. Look out for set-up fees, annual maintenance fees, and sales or commission fees. A “hidden” fee that many people may not consider when buying investments is a management expense ratio (MER) fee, which covers the management and operating costs associated with a fund. Online-only and robo-brokerages usually have lower overall fees and also tend to offer equities with lower MERs.

SDRSP Alternatives

If you’re risk-averse, you may prefer to open a high-interest savings account RRSP. Returns may be more moderate, but you also don’t risk losing money.

Holding a GIC in your RRSP is also a low-risk investment option.

If you have contribution room in your tax-free savings account (TFSA), consider maxing out that account instead, especially if you make less than the lowest tax bracket income threshold (which is $55,867 for 2024). While TFSA contributions aren’t tax-deductible, if you’re in the lowest tax bracket already, the RRSP deduction isn’t likely to help you much. Plus, the amount you invest in a TFSA and its earnings can be withdrawn tax-free — unlike the money in an RRSP, which is taxed when you withdraw it early or in retirement.

Yes, employers may be able to contribute to a self-directed group RRSP.

Yes, you can hold a range of investments in a self-directed RRSP, including stocks, ETFs, mutual funds, GICs, and bonds

Self-Directed RRSPs: What to Know

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