What are segregated funds?

A segregated fund is a type of investment vehicle commonly used by Canadian insurance companies to manage individual, variable annuity insurance products. A segregated fund offers investment capital appreciation and life insurance benefits.

Investors can expect to pay a slightly higher total expense ratio on segregated funds due to their more complex structure. Additionally, these fund offerings typically do not have aggressive fund objectives. Therefore, returns from the funds tend to be more modest.

Importsant Notes about Sagregated funds

They are available in a variety of account types, including RRSPs, TFSAs, non-registered, RRIFs, LIRAs and LIFs. They are available in a variety of account types, including RRSPs, TFSAs, non-registered, RRIFs, LIRAs and LIFs.
Segregated funds are considered to be insurance products sold by insurance companies and, as a result, the governing bodies and regulations responsible for overseeing segregated funds are usually the same ones that cover insurance companies.
Unlike mutual funds, segregated funds provide a guarantee to protect part of the money you invest (75% to 100%). Even if the underlying fund loses money, you are guaranteed to get back some or all of your principal. + read full definition investment.
Segregated funds begin payouts to investors following the specified maturity date. Investors can choose from various options for a payout schedule offered by the product once the segregated fund matures.

RRSP – Registered Retirement Savings Plan

RRSP – is a government registered individual retirement program, which is usually started in addition to two government programs: CPP (Canada Pension Plan) and OAS (Old Age Security).

A RRSP is the most popular way to accumulate personal funds for retirement, especially if you are not participating in your employer’s plan. A RRSP is a private, self-directed accumulating plan. Contributions to a RRSP are tax deductible – the contributions reduce taxes, and income or capital gain from the investments inside RRSP are tax-deferred. You will pay taxes when money is withdrawn from your RRSP account. Let me remind you about Canadian tax rates (province of Ontario) to show how beneficial a RRSP is for its owner in 2023.

Tax-Free Savings Account – TFSA

In 2009, the Government of Canada introduced a new kind of savings account, in which the income does not get taxed, hence, Tax-Free Savings Account (TFSA). This is a good option and in my opinion should be quite attractive to people of all ages and income levels. It doesn’t matter what your income is, being able to avoid taxes on your income should be liked by everyone.

As usual, in order to accept something it’s best to first understand it, to avoid any misunderstanding. I would like to tell you in a little more detail about TFSA and some problems people run into (they are forced to pay penalty as they were not fully familiar with rules and restrictions of this program).

RESP – Registered Education Savings Plan

The Registered Education Savings Plan (RESP) is a long-term savings plan to help people save for a child's education after high school, including trade schools, CEGEPs, colleges, universities, and apprenticeship programs.