The Fallacy of the RRSP Investment

by Dave Peniuk

I am going to get to the point today, which is often very tough for me (according to my lovely wife and business partner, Julie!). You see, I just returned from a conference on how we can utilize the cash in our Registered Retirement Savings Plan (similar to an IRA in the USA) and become fat and rich like our Banks, and lend that cash out as mortgages. But besides learning about the process of how to do it and following all of the government rules and regulations, it was pointed out just how few Canadians actually understand what their RRSP is.

I call it the “Fallacy of the RRSP Investment“. You see, a fallacy is “an incorrect or misleading notion or opinion based on inaccurate facts or invalid reasoning“.

Your RRSP in and of itself is NOT an investment.

It is a special type of account that can hold funds in it and the funds in it are tax deferred (thus, you can write-off your contributions to it and the returns are not taxable either – UNTIL you begin withdrawing the funds).

But, and this is very important, the RRSP is not an investment. The GIC’s, Mutual Funds, Stocks, Bonds, Mortgages (yes, you can invest in a mortgage through you RRSP account) are the investment.

I want to inform Canadians (and even our US counterparts with their IRA accounts) that they need to educate themselves and take more control of their money. If you do not know, unequivocally, what investments you have within your RRSP (or RESP, LIRA, RRIF, etc.), and what is their NET RETURN to you, then you need to take a good hard look.

This is what Dave looks like when he's excited

And you know what I am excited about? Really excited about? I am excited about the fact that I now have the full knowledge of how to use the cash in my RRSP’s and how I can help others use the cash in their RRSP’s to invest in mortgages (and with it the knowledge of what the NET RETURN will be because it’s a mortgage!! – you know, like the ones that you pay the banks hundreds of thousands of dollars in interest??!?!).

Now, I am not giving advice, as I am not a “Licensed Investment Salesperson” at one of the financial institutions (many Financial Advisors were called this until 2008), but I am letting you know you have other options available to you in your RRSP accounts. And, I urge you to find out:

  • What are you invested in within your RRSP (RESP, RRIF, LIRA)
  • What are your NET returns (this is your total return less all the fees charged by your Advisor, or Mutual Fund, or admin fees..)
  • If you have a Financial Advisor, Planner, Broker, ask him or her to explain how your investments are doing in REAL CANADIAN LANGUAGE
  • Ask your Planner what they are invested in and see if they are invested in any of the same products they suggested you invest in

If you do the above, and are able to get a real handle on the investments within your RRSP (or IRA), then you will be well on your way to taking real control of your money….because hey, no one and I mean NO ONE will (or more importantly SHOULD) careย  more about your money than you!


Filed under real estate, RRSP

11 responses to “The Fallacy of the RRSP Investment

  1. Great post Dave!! I hope you don’t mind but I couldn’t help sneaking in that goofy photo of you jumping into the water in Belize … When I think of excited Dave I think of you yelling “CANNON BALL” as you jumped into the water there!! ๐Ÿ™‚

    I think this is such an important point … and we’ve learned over and over that nobody loves our money as much as we do. So you have to watch over it … the whole objective of investing is to send your babies out into the world to grow up and make more babies. And that goes for understanding exactly what kind of a return you are getting net of all fees and always striving to do better.

    I like excited Dave. And getting to the point Dave. Very good. ๐Ÿ˜€

  2. cameron


    I couldn’t agree more. I will post up more later.

  3. Thanks Cameron for your comment. And thanks Julie to posting the goofy pic of me!

    Cheers to taking control of your money!

  4. Hello Excited Dave!

    I really liked one of the last points you made in our post. You mentioned to ask your financial person, what they are invested in.
    That is a really important point, because you would want to know if they are invested in the same products they are recommending to you. If so, great. If not, it would be wise to find out why.

    A few months back, I was doing a lot of research into Olympia Trust and TD Waterhouse. I found out a great deal of information on these Canadian RRSP administrators.

    It is stunning how little of the population actually knows that you can invest your RRSPs in mortgages. Even in the Financial Services Industry, I would say that 99% of the people working in the industry don’t know this.

    Knowledge is power.


    -Neil. ๐Ÿ™‚

    • CANNON BALL indeed Neil!!!

      We are now working with people who want to take control of their money and receive a return that is understandable and a NET return – not GROSS less a whack of fees!

      Cheers! Oh, and P.S. GO CANADA GOOOOO!

  5. Pingback: Understand Your RRSP And Control Your Money | REI News Watch

  6. Dave,

    Thanks for the reminder. I agree that it is so important for everyone to be informed and educated when it comes to RRSP. Great post!

  7. Pingback: Understand Your RRSP And Control Your Money | Real Estate Investing Blog -

  8. LindaJ

    You know… this is interesting. I won’t tell you my age but I will say that I am soon to collect government pension money so that gives you an idea. And we’ve had RRSP’s for decades. I’ve never once heard that I could hold a mortgage with my RRSP money. I am not sure I am interested in doing that now as we’re only a few years from starting to withdraw from the funds but perhaps I should let my children know about this option. Is there a good resource on this subject?

    • Hi LindaJ!

      Thanks for stopping by and posting a comment! It’s interesting because you are like many others in Canada (and the U.S. too) that did not know that we are able to hold mortgages in our RRSP’s (and RESP’s, RRIF’s, and LIRA’s).

      The main reason it is a “secret” is because the financial industry (the big banks and even credit unions) are in many cases unaware of it and do not try and promote it (they spend over $100 Million per year on marketing THEIR products). You see, if we start holding mortgages, we are then in competition with the banks. How will the banks make hundreds of millions of dollars per year if we aren’t getting mortgages thru them? Sure, they’ll make money elsewhere, but their big moneymakers are mortgages AND selling us their mutual funds, gic’s, and stocks which are often held in our RRSP’s.

      Now, it’s important to note that we can’t use the funds in our RRSP’s to be a mortgage on our own house…but you could lend me, for instance, funds from your RRSP’s on one of my properties. You effectively, start to make money like the bank! The best part is that if the funds are in your RRSP, the return you make is all non-taxable and does not count as contributions (so you can still contribute up to your maximum yearly amount).

      And, while you mention that you wouldn’t want to do this because you are getting close to withdrawing your own RRSP funds, with RRSP mortgages, you can set a 1, 2, 3 or 10 year or more term! So, if you want, you lend the money for 2 years, get paid back in your RRSP at a predictable and safe 6% or 7% per year (vs. 1.5% GIC the bank pays you), and then you can start withdrawing the funds once your Borrower has paid you back the mortgage.

      As for a great resource that explains all of this, go to which is a website from a great colleague of our’s, Greg Habstritt. His book will be published in early April and goes into significant detail of how the RRSP mortgages work and why many of us do not know that it’s possible.

      Thanks for stopping by LindaJ!

  9. Hey there! I’m at work surfing around your blog from my new iphone 3gs! Just wanted to say I love reading your blog and look forward to all your posts! Keep up the great work!

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