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Registered vs. Non-Registered
In Canada we have numerous ways to save for retirement. We can use one or more registered savings plans or direct our savings into non-registered accounts or other assets.
Registered Savings Plans
“Registered” is a term used for savings plans and accounts that are registered under, and must comply with, the federal Income Tax Act and Quebec’s Taxation Act.
If registered, money inside these plans or accounts grows tax-sheltered; that is, investment income is not taxed while it is in the plan. With the introduction of the Tax-Free Savings Account (TFSA) in 2009, there are now two broad categories of registered savings plans.
Registered retirement savings plans (RRSPs)
Contributions are tax-deductible or reduce the taxable income in the year of claim.
Amounts withdrawn are subject to tax. They are added to taxable income in the year withdrawn.
Examples are registered retirement savings plans (RRSPs), registered pension plans (RPPs) and deferred profit sharing plans (DPSPs).
Investment plans that are RPPs are called "defined contribution" or "money purchase plans".
There are also locked-in versions, usually created when money is transferred from a pension plan at retirement or termination.
Contributions are not tax-deductible.
Withdrawals are not taxed.
The term “non-registered” may be used to describe any investment account that is not registered. The income (such as, interest and dividends) is taxed when received or accrued. Capital gains, realized when an investment is disposed of, are taxable. However, the money originally invested is not.
Examples of non-registered investments inlude stocks, bonds, mutual funds, guaranteed investment certificates (GICs), and so on, that are held in a “cash”, “open” or “investment” account with a brokerage, bank, investment management firm or other financial institution.
“Non-registered” may also apply to other assets or investments. Investment real estate is an example. Employees may be able to participate in a non-registered savings plan through their employer (such as, an employee stock/share purchase plan, or ESPP). Using payroll deductions, employees are able to purchase shares of their employer’s stock.
Examples of non-registered accounts, investments and other assets are:
Saving and investment accounts, such as:
Bank chequing and savings accounts
Cash/trading accounts (such as, holding stocks or mutual funds not held in a registered savings plan)
Non-registered investment accounts, including employee share purchase plans
How taxes are applied to an investment can make an incredible difference. This calculator is designed to help compare a normal taxable investment to two common tax advantaged situations: an investment where taxes are deferred until withdrawals are made, and an investment where taxes are paid on money that goes into the account, but all withdrawals are tax free.
Information and interactive calculators are made available to you only as self-help tools for your independent use and are not intended to provide investment or tax advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.