Registered Vs. Non-Registered Investment Accounts

June 21, 2019

Registered Vs. Non-Registered Investment Accounts

What investment account should you invest in or when should you utilize a non-registered/registered account? Should you put money in TFSA or RRSP? What is the difference between registered and non-registered accounts? Canadians often find it difficult to answer these questions.

While many Canadians understand the importance of savings for retirement, it’s crucial to select the right investment vehicles that fit your goals and financial circumstances. You can pick one or a number of investment accounts based on your situation. Consult a financial planner who can help you make the right decisions.

What is a non-registered investment account?

Non-registered investment accounts are flexible and advantageous in terms of tax and contribution limits. These accounts are offered by financial service providers and banks in Canada. It is recommended in some situations to use non-registered accounts for both long-term and short-term investing.

While non-registered accounts have no contribution limits, consistent liquidity makes these accounts ideal for some Canadians. So far as tax benefits are concerned, capital gains from investment in non-registered accounts are taxable at 50% of your marginal tax rate.

You can use these investment vehicles in combination with other investment accounts such as registered retirement savings plan (RRSP) accounts. RRSP comes with certain requirements for contributions and withdrawals. You report your RRSP withdrawal as income; however, at age 71, RRSP accounts should be converted into a registered retirement income fund (RRIF).

Choosing between registered and non-registered accounts

You need to consider a number of factors before making a choice between registered and non-registered accounts; for example, your current marginal tax and the expected marginal tax rate in retirement, amount you’re planning to invest, investing objectives, nature of returns, types of assets you want to invest in, etc. As mentioned earlier, financial situations or objectives vary from person to person. It’s important to talk to a professional financial planner to know your best options.

When you withdraw funds from your RRSP account, outside of the Lifelong Learning Plans or Home Buyers’, you lose that part of your contribution room permanently. However, the unused portion is carried forward. Also, you can’t contribute more than you’re allowed. One important factor to consider here is that earning on RRSP accounts compound tax-free. These additional funds improve your portfolio returns making RRSP an effective channel to grow your retirement income.

Your marginal tax rate is likely to be higher now than it is going to be in retirement. This makes RRSP an effective tax-saving strategy for Canadians. You can also contribute to a spousal account and take advantage of income-splitting as a strategy to reduce your tax burden in retirement.

About Kewcorp Financial

Kewcorp Financial is a team of experienced and highly qualified financial experts in Edmonton where we provide solutions to all complex financial matters. From Investment and retirement to tax and estate planning, we provide objective guidance and help you prepare for a financially stable future. Visit our website or contact us for more information!


Jim Kew

Financial Planner
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Scott Kew

Financial Planner
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