For many Canadians, a Registered Retirement Savings Plan (RRSP) is the cornerstone of their retirement planning strategy. In addition to providing tax-deferred growth on contributions, an RRSP allows investors to control the assets in their retirement portfolio. Although Canadians are familiar with the most common types of qualified RRSP investments—stocks, bonds and mutual funds, for example—they often overlook Mortgage Investment Corporations (MICs) in their retirement planning process. This guide introduces the strategic benefits of incorporating MICs into an RRSP for both experienced investors and those new to mortgage investing.
Using MICs Strategically in Your RRSP
An RRSP is a tax-deferred investment account that helps Canadian residents save for retirement. Each year, the government sets a contribution limit based on income . The current contribution limit is either 18% of a person’s annual income from the previous year or the maximum contribution amount specified by the government, whichever is less. For the 2024 tax year, the maximum contribution amount specified by the government is $31,560. The good news is that unused contribution rooms can be carried forward indefinitely.
Qualified investments in an RRSP include stocks, bonds, mutual funds, exchange-traded funds, Guaranteed Investment Certificates, Mortgage Investment Corporations, and cash. MICs offer a unique opportunity to grow an RRSP by providing historically high returns (relative to comparable fixed income vehicles), predictable income, and diversification benefits. Learning about MICs is beneficial for any investor looking to strategically diversify their portfolio.
For many investors, maximizing RRSP investments is crucial for long-term financial planning. An RRSP is one of the few investment tools that allow investors to grow their contributions tax-free until withdrawal. This tax-deferral advantage enables investments held in an RRSP to compound more quickly than those held in non-registered accounts, helping investors build wealth more efficiently over time.
RRSP Basics
Canada established the RRSP investment program in 1957 as part of a broader initiative to encourage Canadians to fund their own retirement instead of relying on government-funded pension programs. This program is intended to address the retirement income needs of Canadians and reduce pressure on public pension programs, such as Old Age Security (OAS) and the Canada Pension Plan (CPP).
Today, Canadians generally use an RRSP as part of a larger wealth management plan, which includes programs such as the Tax-Free Savings Account, and non-registered investments. In this way, an RRSP complements other investment accounts, providing a valuable opportunity for investors to compound their wealth in a tax-deferred manner.
The RRSP program is also used to legally reduce income taxes since contributions reduce taxable income in the year they are made. This is particularly beneficial for high-income earners, who can leverage their RRSP to save on their tax bills during peak earning years.
While an RRSP defers taxes, a TFSA enables tax-free growth on all assets held in the account and allows tax-free withdrawals, offering flexibility for accessing funds. Used together, these programs are a powerful tool to grow wealth in a tax-efficient way.
What Are MICs and How Can They Can Your RRSP?
In addition to traditional stocks, bonds, and mutual fund investments, mortgage investments can play a key role in enhancing an investor’s RRSP portfolio. MICs are investment vehicles that pool funds from investors to provide loans secured by residential real estate, typically in the form of short-term mortgages.
MICs make money by collecting interest payments and fees on mortgages, which are then distributed to shareholders in the form of dividend payments. These distributions are taxed as regular income in the hands of shareholders. In Canada, MICs are regulated under the Income Tax Act and must meet specific criteria, such as distributing all their net income to shareholders annually.
MICs allow investors to access the mortgage investment market through a professionally managed portfolio solution, requiring far less capital and carrying less risk than direct investments in individual mortgages.
Over the past decade, MICs have grown in popularity due to their attractive yields, diversification benefits, and exposure to the Canadian real estate market. For borrowers, MICs provide an alternative financing solution to those offered by major banks, which often means greater flexibility in the lending process. MICs often focus on factors like equity, cash flow, and exit strategy, without the stringent stress tests and other rigid metrics required by traditional lenders. These mortgages carry higher rates as a result, translating into stronger income and return potential for investors.
By 2023, the top 25 MICs in Canada had more than $10 billion in assets under management. Data from the Canada Mortgage Housing Corporation shows that roughly 8% of new mortgages were financed by MICs.
When held within an RRSP, a Mortgage Investment Corporation can provide several benefits, such as higher risk-adjusted returns compared to traditional bonds, recurring income within a tax-sheltered account, and diversification beyond traditional stocks and bonds, providing a buffer against market uncertainty. With no correlation to public markets, MICs provide a stabilizing influence within a portfolio. They also add exposure to the Canadian real estate market without directly owning property.
MICs also provide a hedge against inflation. As inflation rises, property values typically increase, strengthening the value of the underlying real estate collateral and ensuring it retains or even enhances its ability to cover the loan amount. Also, the underlying mortgages, typically with 12-month terms, are renegotiated based on market conditions. If inflation pushes rates higher, lenders can adjust rates at term renewal, keeping returns competitive even during inflationary periods.
How to Invest in MICs
Investors can invest in MICs through a self-directed RRSP account, with the MIC provider directly, or with the help of a financial advisor.
To select an appropriate mortgage investment provider, self-directed investors should review each fund’s historical returns, default rates, fee structure, and portfolio composition. Mortgage Investment Corporations with strong historical returns and an established track record in the Canadian mortgage market usually offer the best investment opportunities. Wealth Awesome, a personal finance platform dedicated to empowering Canadians with practical financial knowledge, named CMI MIC Funds among the five best MICs in Canada 2025.
The historical rate of return for CMI’s MIC funds is between 6% and 11%. CMI targets net annual returns of between 7-8% on its Prime Mortgage Fund, 8-9% on its Balanced Mortgage Fund, and 10-11% on its High Yield Opportunity Fund.
Assuming an 8% net annual return on the Balanced Mortgage Fund, an investment of $100,000 can generate $40,000 in annual returns over five years. Investors can compound their returns by participating in a Dividend Reinvestment Plan (DRIP), which automatically reinvests the regular cash dividends earned on the investment.
The portion of an investor’s portfolio that should be allocated to MICs depends on the individual’s financial goals, risk tolerance, and overall investment strategy. It’s best to consult with a financial advisor to tailor the right allocation based on your specific financial situation and objectives.
Exploring the Benefits of Mortgage Investing in an RRSP with CMI
CMI Financial Group is one of Canada’s fastest-growing non-bank financial services providers. In 2024, CMI surpassed $1 billion in mortgage assets under management, having facilitated more than $3 billion in successful lifetime mortgage placements across Canada.
Investors can invest in Mortgage Investment Corporations with CMI using a tailored strategy that meets their risk tolerance and investment horizon. CMI MIC Funds are diversified portfolio solutions that focus on capital preservation while targeting sustainable returns. Our MIC Funds have successfully yielded net annual returns of between 6% and 11% while maintaining a loan loss ratio well below 1%. Each fund is backed by collateralized real estate in strong residential markets across Canada.
CMI makes optimizing your retirement easy. To learn more about how mortgages can enhance your RRSP portfolio, contact one of our Investment Professionals for a free consultation. We guide all our investors through the RRSP planning and investment process, helping you identify and reach your savings targets as part of a well-balanced portfolio.
