Understanding Non-registered Investment Accounts
When building a strong investment strategy, it’s important to look beyond just registered accounts like TFSAs and RRSPs.
Non-registered accounts can play a key role, especially for those who have already maximized their registered contributions or are seeking greater investment flexibility. While these accounts don't offer the same tax-sheltering benefits, they do provide unique advantages that can complement your overall financial plan.
What is a non-registered account?
A non-registered account is a taxable investment account that doesn’t have the contribution limits, withdrawal restrictions, or tax-deferred benefits of a registered account. You can open one as an individual or jointly with someone else. They are often used to invest surplus cash once registered accounts have been fully maxed.
Key features of non-registered accounts
No contribution limits
Invest any amount, at any time. There are no caps on how much you can contribute. Withdrawals can be requested as needed.
Multiple investment options
Hold a wide range of assets including stocks, bonds, mutual funds, ETFs, GICs, and even alternative investments like crypto or private equity (depending on the platform used).
There are no tax deferrals or deductions
Unlike RRSPs, contributions are made with after-tax dollars and are not tax-deductible.
Taxable investment income
Income earned within a non-registered account is taxable in the year it is earned. Here’s how different types of investment income are treated:
-Interest Income is fully taxable at your marginal tax rate.
-Eligible dividends benefit from the dividend tax credit, reducing the amount of tax owed.
-Capital gains are taxable at a rate of 50% and apply when you sell an investment for more than you paid.
-Capital losses can be used to offset capital gains in the current year or carried forward/backward to reduce taxes.
Note: we will be covering capital gains and losses in more detail in a future post, including strategies on how to manage them effectively.
When could a non-registered account make sense?
-You've maxed out your TFSA and RRSP contributions.
-You want unrestricted access to your money.
-You prefer more investment flexibility and choice.
-You're saving for medium- to long-term goals without needing the tax sheltering of registered accounts.
-You’re working with a financial advisor to manage taxes strategically.
Tax planning is key
Because non-registered accounts generate taxable income, thoughtful investment selection and tax planning are essential. Holding tax-efficient investments and strategically realizing capital gains or losses can make a big difference in your after-tax returns.
Not sure how to get started? We can help
Non-registered accounts are a powerful tool for building wealth beyond the limits of tax-advantaged accounts, but they also come with tax considerations that shouldn't be overlooked. If you’re unsure how to incorporate a non-registered account into your investment plan or want to review your current strategy, contact us. We can help you build a plan that supports your goals, tax-efficiently and confidently.
TL;DR:
A non-registered investment account offers unlimited contributions, no withdrawal restrictions, and access to a wide range of investments, but all income is taxable. There are no tax deductions or deferrals, so it’s best used once you’ve maxed out your registered accounts or require maximum flexibility. Talk to a financial advisor to manage tax implications and investment strategy.
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