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Have an RRSP with Work, but want to Invest in Private Mortgages too? Here’s How!

23 November 2013

Last week we talked about investing in private mortgages through an RRSP, and the specific type of RRSP you’ll need to open in order to do it (self-directed,) as well as where you can go to get help from professionals that can set it up for you (a brokerage.) But throughout the week we’ve had lots of calls from people asking about the RRSP they have through work, and whether or not this would be eligible for using as their private mortgage RRSP. The answer, as it is with so much other investment advice, is that it depends.

RRSPs that you contribute to through work, usually operate a certain way. Typically speaking you will make a contribution that will come off one or two cheques each month, and your employer will match that amount (or a certain percentage of it.) Once it’s in there, you can still withdraw it any time you need to (it is yours, after all,) but you might not be able to use it to invest in a private mortgage. This is because RRSPs that you have through work are, the majority of the time, restricted to mutual fund investing only. Places of business often don’t want to get involved in hiring a brokerage and setting up private mortgages through RRSPs for their employees simply because it would take a lot of time and money for them to do that with 100+ employees. So they stick to investing through mutual funds.

But that doesn’t mean you have to as well.

You can have more than one RRSP account at all times. In fact, you can have just about as many RRSPs open at a time as you wish. The number of these accounts doesn’t matter, but the amount you contribute each and every year does, so you have to be careful.

Let’s say for the sake of easy math that your contribution room this year is $35,000. You’re contributing to your work RRSP $5,000 a year, and so your employer is also matching that $5,000. That’s already $10,000 that you have contributed, and you don’t want to go over more than that, otherwise you’ll be hit with an over-contribution fee. You could use the remaining $25,000 to put it into a completely separate RRSP and use that account to invest in private mortgages. You just need to be very vigilant of how much money is being contributed to each account, and that you don’t go over the amount allowed.

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