What is physical gold RRSP and  gold TFSA

gold RRSP Canada

  • Gold RRSP is arguably the easiest way of investing in gold in Canada. The huge tax advantages that come with the plan make this theory true. The fact that the investment is secure has seen it being utilized by some of the world’s leading investors. You will not go wrong if you choose gold as an retirement investment in Canada. As long as you have a Registered Retirement Savings Plan (RRSP), you are good to go. In fact, many financial and retirement analysts predict that investment in gold and other precious metals such as silver will be a big trend in Canada in the year of 2017.
  • A Tax-Free Savings Account (TFSA) is a program launched in 2009 in Canada to enable Canadians with social security numbers make savings. If you have one, you will not be taxed for any savings contributed to your account. This is also true for investment incomes and capital gains. A TFSA is therefore an ideal account for gold investment.

There are several companies that provide their services to allow Canadians to add physical gold to their portfolios in accordance to the 2005 Federal Budget Law.

The first step in converting your Registered Retirement Saving Plan to gold is to purchase the gold itself, but take note that the gold and silver must be purchased and verified by a third party custodian, who then reports this to the Canadian Revenue Agency. After that, your assets have to be securely transported and stored.

Even though gold is stored at a vault, your metals can be shipped out whenever desired.

Benefits of holding gold in your RRSP or TFSA

  • gold and silver provide a level of security that other investments cannot
  • stable form of currency
  • diversifying your investment portfolio
  • hedge against inflation
  • tends to grow in value during economic uncertainty

Since 2005, the Canadian Revenue Agency also referred to as the CRA has allowed individuals to invest their RRSPs in coins and precious metal bars. Therefore, rest assured that your investment is recognized, certified and regulated by the law. Examples of these include the Canadian silver and gold maple leaf bullions, Austrian gold and silver bullion coins and American silver & gold eagle bullion coins among others.

In its regulation it allows you to invest in other coins and bars as long as they are at least 99.5% pure. In another rule, the bars and coins should be bought directly from a CRA accredited refiner or from a government regulated financial institution. When investing, let experts ascertain that the coin’s value is derived from the content of the precious metal.

Note that the law does not consider the investment into coins and bars with numismatic value only. Even if investment coins and bars of numismatic value attain the minimum value of the 95% pureness, and have been obtained from a certified refiner or financial institution, CRA will still not certify the investment. This is perhaps the more reason you should talk to a gold investment expert.

Tips for Investing TFSA in Gold in Canada

Tax-Free Savings Accounts have existed in Canada since 2009. For this reason, there are not as many people investing in gold using a TFSA as compared to those investing in the precious stone using a RRSP. Read on to understand benefits as well as ideal circumstances under which you are encouraged to use your TFSA.

Do you plan to withdraw your funds before you attain 71 years of age? Note that there will be penalties as opposed to a free withdrawal for persons aged 71 year or older. When you attain 71 years, your RRP is converted to a Registered Retirement Income Fund also referred to as RRIF where annual withdrawals are mandatory.

TFSA accounts are more flexible than their RRSP counterparts. Here, you can withdraw your money whenever you like without being subjected to tax obligations.

The following are other scenarios when you could consider TFSA investment in gold

  • You belong to the low-income bracket (usually earning $35,000 or less).
  • You qualify for government retirement benefits such as Old Age Security and Guaranteed Income Security among others.
  • You are already an RRSP contributor to the maximum.
  • You do not desire to have mandatory cash withdrawals when aged 71 years or older
  • You desire to continue contributing deposits ever after attaining 71 years.
  • You desire flexible periods on your withdrawals.

Legal Framework around gold TFSAs in Canada

The investments that Canadians can make under their RRSPs are also allowed in TFSAs according to the laws under Revenue Canada. Income tax regulations define these investments as cash, bonds, stocks, ETFs, GICs, mutual funds as well as qualified precious metals such as gold and silver.

If legal tender bullion coins are minted by the Royal Canadian Mint, they qualify under law. The same is also true if they are made by a metal refinery that is qualified by London Bullion Market Association. Here, they should bear a hallmark to identify the refiner plus the weight and purity of each bullion coin.

Putting Gold into Your TFSA

The regulations for TFSA’s are very similar to those of RRSPs when investing in gold stocks, mutual funds or EFTs. However, note that there is a 25% tax for non-residency withholding on dividend income applicable to TFSA’s but not for RRSPs. For this reason, RRSPs are more suited for dividend-paying US equity investments.

Most financial institutions that offer gold investment under RRSPs also do the same for TFSAs. The procedure is similar. It is prudent however to note that RRSPs are financed with before tax income while TFSAs are financed with after tax income. You have many discount brokerage firms at your disposal under both investment plans.

You will typically buy physical gold bullion coins under a TFSA plan just as you would under an RRSP. Opening an account at any of the above-mentioned companies is easy. In the future, you could sell your physical gold directly through these companies or via any of their legally appointed affiliate dealers.

Finding the best rated Gold & Silver RRSP or TFSA Company

Canada is home to many third party companies that help you out. While financial analysts and regulators have lists of these third parties, it is your duty to narrow down your search and only settle for the most reputable with the highest ratings possible.

More importantly, obtain sound financial advice from a trusted financial expert in Canada. Note that some financial institutions do not deliver what they promise. From the onset, ensure that your appointed company is able to set up your account easily. There are usually little or affordable account opening charges.

Let them show you proof of reporting to CRA over the time they have been in operation. You could talk to CRA representatives and prove that the company actually reports to the agency. In addition, let the company prove to you that they can buy back your gold bullion. Look at similar case scenarios that the company has handled in the recent past.

Our top pick of reputable precious metals RRSP and TFSA companies

Perhaps the three leading gold RRSP companies in Canada are Silver Gold Bull, Regal Assets and Questrade. The following is an examination into the strengths of each company. The terms and condition of each company cannot all be listed here. It is therefore prudent for you to do a thorough homework and learn as much information as possible. Read on and choose the one that best suits your interests.

  1. Regal Assets– This is perhaps Canada’s leading third party choice whether you want to invest gold in your RRSP or in your TFSA. The company states that RRSP investments into precious are its flagship project. It was established in the United States back in 2009 and expanded into Canada in 2016. Today, it boasts of offering the highest value and satisfaction in its industry. You are highly encouraged to explore its options for gold as a retirement investment in Canada.
  2. Silver Gold Bull– This is among Canada’s best bet as far as trading of gold bars and coins is concerned. It is an online-based platform that has its headquarters in Calgary and allows you to trade qualified coins and bars of gold and other precious stones. However, be careful while buying because some of their assets may not attain some threshold as required by the CRA. The company has storage partners in Calgary and Toronto where purchasers have their assets stored.
  3. Questrade This was the first company to establish physical holding of silver coins and gold bullion bars in Canada. As long as you have a registered account here, you can invest in gold for as little as $1,000. It is another safe bet for gold RRSP in Canada but has limited expertise and options. Ensure you read and understand the broker’s guidelines, terms and conditions. When you buy bullion bars and coins, they will be stored under your name. These assets are either kept at the Royal Canadian Mint or at International Depository Service of Canada (IDS).

Benefits of Investing RRSP in Gold in Canada

• Most precious metal – Why should you invest your RRSP in gold and not in any other precious metal anyway? The fact that gold is the world’s most precious metal cannot be overemphasized. With dwindling gold mines, the world’s appetite for gold increases each year.
• Inflation-proof – While inflation badly affected other investments and lesser valuable assets, gold is inflation-proof. When you buy your gold coins and bullion bars with today’s dollar value, you could sell them off at high rates tomorrow. It is therefore a safe hedge against inflation.
• Less risky investment- Unlike investments in companies that are prone to electronic blackouts, banking crises and stock market crashes, physical gold assets are safe and secure. They are also immune to political catastrophes and socio-economic upheavals. During geopolitical uncertainties, also referred to as crisis commodity, gold usually performs better than other investments.
• Weakness of the dollar- Even as it is the world’s most valued reserve currency, the dollar is not immune to falls against other world currencies. When its value falls, people rush to the security of gold, effectively increasing gold prices. A case scenario is the dollar value fall experienced between 1998 and 2008.
• Little price fluctuation-Even in times of economic crises, gold fluctuations are not as severe as those in paper assets or paper money. After all, governments and uncontrolled financial actions cause money laundering and excessive money minting that directly affect investments.
• Great liquidity- Gold bullion coins and bars guarantee you excellent liquidity because you will sell them for the amount you want, as long as it is financially sensible. Unlike other sales and investments, the trading in gold is not determined by a set market value. The same cannot be said of investments where valuers and auctioneers have vested interests in the transaction.
• Little or no liability- Unlike in ordinary business, you will not incur huge expenses in transportation and storage. Your physical gold bullion coins and bars are stored in a safe mint. In case the security is compromised and the assets vanish, it is the responsibility of the appointed storage facility to compensate you.
• Portfolio Diversification- Gold is usually different from other financial investments. It is therefore a safe way of diversifying you investments so that gold cushions you against total loss when other trades fall.

Having understood the benefits of investing in physical gold, isn’t it time to register an account off your RRSP? If you are unsure where to start, contact a reputable gold analyst with a solid experience in RRSP investment in Canada.