The Registered Retirement Savings Plan, or RRSP, was the primary tax-deferred savings account in Canada up until 2009 when the more flexible Tax-Free Savings Account, or TFSA, was introduced. However, TFSA hasn’t diminished the value of the RRSP, and it’s still used by millions of Canadians to build a tax-deferred nest egg for their retirement years.
RRSP’s contribution limit is influenced by your annual income, but relatively few people manage to make full contributions to their RRSP. As per Statistics Canada, the median RRSP contribution to the RRSP was $3,890. Still, even an underfunded RRSP can be turned into a sizable nest egg with the right stocks.
A railway stock
Canadian National Railway (TSX:CNR) is one of the two prominent railway companies in Canada, with an extensive North American footprint and a diverse range of operations.
The railway network, which connects three main costs of the region and several critical points across Canada and the U.S., is the primary strength of the company. The company has augmented this strength by building a trucking fleet to cover last-leg deliveries.
Thanks to its business model, reach, and footprint, this railway giant is expected to remain relevant for decades to come. However, its fundamental strengths also include healthy finances and a manageable amount of debt.
It’s a well-established Aristocrat and has grown its payouts for 27 consecutive years and is currently offering dividends at a yield of about 2.1%. However, the main reason you should consider it for your TFSA is its long-term growth potential.
A real estate management service company
Few real estate companies in North America have as distinct an edge as FirstService (TSX:FSV), the largest residential community manager in North America that caters to the needs of 8,700 communities across the continent. It’s also a leader in essential property services and has multiple businesses (in that space) under its banner.
FirstService has been a robust growth stock since its inception, and even though it has struggled in the past couple of years, the overall appreciation has been quite decent. From its listing in 2015 till now, the company has grown over 470%. Growth like this can propel your RRSP forward at a compelling pace while providing you with the safety of a market leader.
A tech stock
Descartes Systems Group (TSX:DSG) is a tech company dedicated to supply chain and logistics solutions. Its platform gives its clients access to one of the most extensive logistics networks in the world, and its suite of solutions covers everything from visibility to productivity, making it ideal for a wide range of businesses with a variety of logistics needs.
It has catered to over 24,000 customers worldwide, including some of the most well-known global airlines and logistics giants like DHL.
Powerful growth is a common characteristic of Canadian tech stocks, but few offer as much consistency in their growth as Descartes does.
Even if you use its growth in the last five years as a conservative baseline for the estimation (146%), the stock might help you achieve 300% growth in a decade. So, a decent amount of capital in this company, while it’s part of your RRSP portfolio for decades, can yield amazing results for your retirement nest egg.
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Foolish takeaway
Choosing the right stocks for your RRSP is just as important a part of your retirement planning as identifying the right picks for your TFSA. Both accounts come with different tax benefits, and with the right stocks, like the three we have discussed above, your RRSP can become a powerful financial asset for your retirement.
