(NC) - Each time you contribute to a Registered Retirement Savings Plan (RRSP) you're likely envisioning a secure and comfortable retirement. But just how secure is it? Knowing if these hard-earned, tax-sheltered savings are well protected will help you make important investment decisions and plan for a worry-free retirement.
The Canada Deposit Insurance Corporation (CDIC) is the federal government organization that exists to protect the savings of Canadians in the event their financial institution fails or goes bankrupt. CDIC insures eligible deposits held in an RRSP separately from other eligible deposits up to a maximum of $100,000.
For example, suppose that you have a savings account at ABC Bank and you also have a savings account within an RRSP at the same bank. If ABC Bank fails or goes bankrupt, both accounts will be protected separately up to $100,000, for a total of up to $200,000 in deposit insurance protection. Although bank failures in Canada are rare, they have happened in the past and could happen again. That is why it is important to be aware if your retirement savings are protected by CDIC.
In addition to savings accounts, other financial products within your RRSP may be automatically insured by CDIC deposit insurance. GICs or other term deposits with an original term maturity of 5 years or less will also be protected (provided they are held in Canadian currency at a CDIC member institution). It is important to remember though that regardless of how many accounts or financial products you have in an RRSP registered in your name and in the same financial institution, the total combined coverage is still $100,000.
Keep in mind that not every deposit within an RRSP is protected by CDIC deposit insurance. Investment products such as mutual funds, stocks, bonds, treasury bills, and term deposits that mature in more than five years are examples of investments within an RRSP that are not protected. The RRSP must also be held in a CDIC member institution, such as a bank, trust company or loan company for it to be eligible for deposit insurance coverage. For more information on what's protected, visit www.cdic.ca.
Make informed investment decisions when contributing to your RRSP. Whether you are new to the workforce, or planning for retirement, you can take comfort in the fact that eligible deposits within your RRSP are protected by CDIC.
