Non-Registered Investments

A non-registered plan (commonly referred to as ‘open’ or ‘investment accounts’) enables investors to invest an unlimited amount of money in funds with exposure throughout the world. Non Registered plans are not tax sheltered, the gains and losses declared for income tax purposes.

Benefits

• No contribution or withdrawal limits • No account fees (other than applicable sales charges)
• Potentially higher rate of return than on your bank account, and you have access to our various investment vehicles
• Collateral value

Who should consider a non-registered plan

• Investors who have reached their registered retirement savings plan (RRSP) contribution limits and would like to capitalize on their investments to carry out their plans, while retaining a certain amount of control over their investments
• Persons wishing to obtain a source of income through a systematic withdrawal program
• Investors wishing to accumulate amounts in the short term (financial cushion, vacation, etc.)

Definition of 'Non-Registered Account'

A type of investment account that allows Canadian citizens to save money for the long term. Non-registered accounts only tax the capital gains realized inside the account at 50% of the account holder's top marginal tax rate. And unlike RRSPs, non-registered accounts have no contribution limits.

Breaking Down 'Non-Registered Account'

Many financial advisors recommend using non-registered account in conjunction with RRSPs. This allows the investors to invest the tax savings generated by the RRSP into the non-registered account. There are also some cases where the investor will benefit the most from using only a non registered account. Financial analysis is often required in order to determine which type of account will provide the most benefit.

Non-RRSPs and RRSPs:

Now, more than ever, Canadians may want to consider using a combination of registered and non-registered investments to save for their retirement.

As always, if individuals have both non-registered and registered assets, it is more tax-efficient to structure the investments so those that generate interest income are held within the RRSP and those that generate capital gains are held outside the RRSP. Individuals may want to set up their portfolios as follows.

Non-RRSPs

• Hold growth-oriented stocks and equity mutual funds outside RRSPs
• Consider index funds, which have low securities turnover (and management fees); choose physical-based index investments to generate capital gains, as opposed to derivative-based index funds, whose earnings are fully taxed as ordinary income

RRSPs

• Hold bonds and other fixed-income instruments inside RRSPs
• Consider actively managed equity mutual funds and portfolios (no tax implications as securities are traded) Invest a tax refund as part of the following year's contribution to maximize tax deferral