What is a non-registered account and how does it work?

A non-registered account can be used for shorter- or longer-term investing. This type of account can work in partnership with other investment accounts. Here are some key details of a non-registered account to help you decide if it is right for you.

What is a non-registered account?

A non-registered account is a type of investment account that is subject to tax when income is earned on investments held in the account. A non-registered account is sometimes called a “taxable” or “open” account.

How does a non-registered account work?

A non-registered account can be used as part of your overall financial plan, with benefits like flexibility and no contribution limits. Typically, you need to be at least 18 to use a non-registered account, but you can use it for your entire life.

Your contributions to a non-registered account are not tax-deductible. Investments in a non-registered account can earn interest or dividend income that is taxed as it is earned or generate capital gains that are taxed as they are realized. This investment income is taxed as it is earned, but withdrawals are not.

There are two common types of non-registered accounts (cash and margin) that can be opened by individuals or jointly with spouses, and there are many other alternatives. With non-registered accounts, you can invest in mutual funds, exchange-traded funds, stocks, bonds and other products.

Pros

1

Unlike Registered Retired Savings Plans (RRSPs) or Tax-Free Savings Accounts (TFSAs), non-registered accounts have no contribution limits, so you can save as much as you want without any penalty. There are also no withdrawal limits.

2

Anyone over the age of 18 (or 19 in certain provinces) can open a non-registered account. There is no age limit on a non-registered account, unlike a RRSP, which must be matured into a Registered Retirement Income Fund at age 71. So, this could be a good option if you’re over, or planning on using this account over, the age of 71.

3

A non-registered account can be useful if you’ve reached your contribution limit on an RRSP or a TFSA.

Cons

1

Investment income earned and gains realized in a non-registered account are taxable, unlike in a TFSA, for example, where they are tax-free.

2

Your contributions to a non-registered account are not tax-deductible, so you won’t receive a tax deduction, as you do with an RRSP contribution.

3

If you choose to move funds from a non-registered account to a registered account (like an RRSP, TFSA or Registered Education Savings Plan), there can be tax consequences.

If you’re ready to get started, a financial advisor can help you customize a plan.

Learn more

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