How to Transfer Your RRSP to Another Financial Institution - Money We Have (2022)

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Have you ever wonderedhow to transfer your RRSP to another financial institution? It’s a legit question and you may want to do it for a variety of reasons. Some people may prefer to have all their finances with a single bank while others are likely tired of fees or lack of returns from their current financial advisor/financial institution.

At first glance, switching your Registered Retirement Savings Plan may appear difficult. If you’re not careful, you could end up making withdrawals that could trigger tax implications. You would also likely have to pay a fee when you close your accounts. That said, porting your Registered Retirement Savings Plan to somewhere else is a surprisingly easy process. Generally speaking, all you really need to do is sign one form with your new financial institution and they’ll take care of the rest. It’s that easy!

How to transfer your RRSP

  • Open a new RRSPat another financial institution or discount brokerage
  • Fill out the paperwork and have the new financial institution request an RRSP transfer from your old financial institution
  • Choose between transfer in kind or transfer in cash
  • Initiate the transfer
  • Wait for the funds to arrive at your new financial institution

To get yourRRSPtransferred to another financial institution or discount brokerage, all you need to do is fill out the paperwork to authorize them to move the funds over. This sounds simple enough, but you should do a few other things to prepare for the transfer.

First, grab the most recent statement from your investments and bring it to the new financial institution. They’ll basically want to know if you want to do a transfer “in kind” where you can literally just move your investments to them as is (when available) or if you want them to “sell” all your investments so you can start fresh with the “cash” from the sale. An “in cash” sale is mandatory if you’re moving your money to a financial institution that doesn’t offer the same investments as your previous one. You’d basically sell your old investments at fair market value and then reinvest in something else at your new financial institution.

This in kind or in cash transfer is arguably the most important part. Since the new financial institution is requesting a transfer from your old RRSP to your new RRSP, no taxes will apply. What that means is that you can’t just withdraw your finds on your own and then redeposit it into your new accounts. There’s a specific process that needs to be followed. If you did it any other way, it would trigger withholding taxes that would affect your income tax return.

Now the institution you’re leaving won’t be happy once they find out you’ve triggered the transfer, but they really have no say at this point. What they can do is charge you a transfer fee which should be posted on their website. The good thing is that the receiving institution will usually cover that fee for you up to a certain amount so ask them about it before you sign.

The transfer can take some time but you still want to ask your new financial institution about when you should expect your funds to arrive. Monitor your account and if your money hasn’t arrived by the time they said it would; make a follow-up call. While rare, your old financial institution may be holding things up.

Once your money is in your new account,you can start investing. Alternatively, your new institution can start investing on your behalf. Be mindful of theRRSP deadlineif you want to transfer things in advance. The deadline is 60 days after the start of the new year, but transfers can take weeks to complete.

Note that since you’re just transferring funds, your available RRSP contribution room is irrelevant. You’re not adding any new funds to your RRSP, so there’s no to worry about how much space you have left.

Should you transfer your RRSP?

People who are seriously considering transferring their RRSP (or any investments for that matter) usually aren’t satisfied with how their money is currently being handled. Making a switch just because your investments haven’t been performing well is probably a bad idea. Why? Because markets change all the time, so you need to stick to your plan (assuming you’ve got an actual investment plan).

Admittedly, changing financial institutions just to lower yourmanagement expense ratio(MER) is often worth it. For example, let’s say you’re paying an average MER of 2.5% for a mutual fund. If you switched to an all-in-one ETF, the MER is usually below .50%. That’s a 2% savings that could translate to tens, if not hundreds, of thousands of dollars over the course of your investment life.

Questrade’s entire marketing campaign is based around lower fees, and I admit, it’s probably worthmaking the switch. That said, you need to have the right mindset before you make any changes. Switching just because your investments haven’t been performing well in the last few months is a bad idea. Why? Because markets change all the time, so you need to stick to your plan (assuming you’ve got an actual investment plan). However, if your investments are constantly performing below market averages, then you should switch.

Another instance where you may need to transfer your RRSP is when you’re changing employers. If you were part of their group plans, you likely won’t have access anymore if you leave the company. This would require you to move your money out. Fortunately, as you’ve already, it’s easy to make a transfer since it can be done in a lump-sum.

Note that if you’re looking to transfer your Registered Pension Plan (RPP) to your RRSP or you want to convert your RRSP to a Registered Retirement Income Fund (RRIF), it’s a slightly different process that requires a bit more paperwork. Basically, when you leave an employer with a defined benefit pension plan, your plan administrator will provide you with different options for your money. How much you can transfer to your RRSP/RRIF/LIRA will depend on your years of service, a formula that determines your pension income, and what contribution room you have available. The paperwork you get after leaving will be quite clear, so there shouldn’t be any confusion.

When should you transfer your RRSP?

Let’s assume that you’ve already decided you want to switch. There’s really no reason to delay things. Don’t try to time the market so you’re selling high and then buying low after the switch. Just stick to your investment plan whatever that may be.

One thing that might hold you back is any fees associated with transferring out your funds. Some mutual funds have deferred sales charges which will cost you a percentage of your portfolio when you make the transfer. There’s no denying that these fees suck, but the amount you’ll save in the MER difference could pay for itself after a few years. Note that DSC fees have been banned in Canada, so they’re no longer a major concern.

If you’re switching from an employer plan, you may have a set deadline to move things out, which is why you don’t want to delay things.

Before you make the switch, you’ll need to decide where you’re sending the money. Is your goal to use a robo-advisor since it’s a low-maintenance, no fee solution?Justwealthhas become one of the most popular robo advisors in Canada and they’ll even give you up to $500 for free if yousign up with my referral link. Wealthsimplegives people $50when they sign up. What’s great about robo advisors is that they’re transparent and don’t require any effort on your end.

Some people will prefer to manage their finances on their own, but that will require you to know what you’re doing. This may sound intimidating, but if I learned to manage my finances on my own, so can you.

When not to transfer your RRSP

In a few situations, you might not want to transfer your RRSP or you might not be allowed to at all.

If your employer offers some kind ofRRSP matching programor has a group rate for investments, there’s a good chance that you’ll be forced to keep your money invested with a specific financial institution or brokerage. This may be annoying, but considering you’re getting a match or access to funds which cost less; I think you’re actually coming out ahead.

As mentioned above, you shouldn’t transfer your RRSP just because you’re disappointed with the performance. I did this years ago before doing my research and ended up with an advisor with a financial institution that put me in overpriced mutual funds.

Finally, if you recently purchased investments that have a holding period, you shouldn’t make a transfer right away. Just wait for the holding period to end so you can avoid paying any additional fees. For example, with theHome Buyers Plan,you need to have your money in your RRSP for at least 90 days for it to qualify. If you need that money, you’re better off leaving it in.

Final thoughts

Transferring your RRSP to another financial institution is simple; you just want to make sure you’re doing it for the right reasons. Once you’ve committed, take the time to ensure that everything is the way you want it to be so you don’t end up switching again in a few years. Note that if you’re looking totransfer your TFSA to another financial institution, it works in a very similar way, but you have a few additional options.

How to Transfer Your RRSP to Another Financial Institution - Money We Have (1)

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