Segregated funds, a type of special Canadian open-ended fund, is suitable for investors who prefer low-risk options. It combines the growth potential of a mutual fund with the security of a life insurance policy. Here, the insured person can be refunded the majority of his or her principal investment.
A registered retirement savings plan (RRSP) is an investment account for retirement in which an investor makes regular contributions and enjoys several benefits, including tax exemption for the investment, tax exemption for the account accumulation, and a low tax rate for the balance withdrawal once retired.
A tax-free savings account (TFSA) provides tax exemption for both the interest accrued and for any withdrawals made on the balance of the savings account. Individuals over 18 can save up to 6,000 CAD per year, and the final balance can reach 63,500 CAD. Different from an RRSP, the holder of a TFSA is not eligible for tax exemption for his or her annual investment.
Annuity is a retirement product. With annuity investments, an investor regularly contributes a certain amount to the annuity account for a period of years and is then eligible to withdraw a lump or partial sum from the interest (the dividend in addition to the principal). Annuity is categorized into three types: variable annuity, fixed annuity, and index annuity. A variable annuity is invested in the mutual fund market and has high risk. A fixed annuity focuses on fixed-interest products with stable but relatively low dividends. An index annuity mainly invests in index markets such as the DOW and the S&P 500 and has relatively high returns.
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