Have you reached your maximum TFSA contribution limit? Topped up your RRSP? If your answer is yes, and you want to keep saving for your retirement, then a non-registered savings plan - sometimes referred to as an NRSP - is what you need! Explore how this effective and flexible investment account can fit with your retirement plans.
What is a non-registered account?
Before we define a non-registered account, it helps to know what makes an account “registered.” In Canada, a variety of savings and investing accounts offer tax incentives for contributing. As such, they are registered with Canada Revenue Agency (CRA) and come with limits on contributions, as well as rules around withdrawals and age. These accounts include the Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP), as well as income-generating accounts, like the Registered Retirement Income Fund (RRIF).
On the other hand, non-registered accounts come without these restrictions. While this increased flexibility offers greater potential for growth, the trade-off is that you lose the tax-sheltering advantages on your contributions and investment growth. Still, in cases where you’ve exhausted your registered options, a non-registered account can supplement your retirement savings and help you reach your goals faster.
What’s the difference between registered and non-registered accounts?
The chart below outlines the main differences between non-registered accounts and popular registered accounts like RRSPs and TFSAs.
|Is there a minimum age?||No, but you must have earned income and have filed a tax return||18||18(to own a plan), but no minimum on the annuitant. Or 16 for non-registered segregated funds, if purchased through a life-insurance company.|
|Is there a maximum age?||711||No||No|
|Is there an annual contribution limit?||18% of your earned income up to a maximum of $30,780 in 20232||$6,5003in 2023||No|
|Do contributions reduce taxable income?||Yes||No||No|
|Are withdrawals taxed?||Yes||No||No|
|Are investment gains and losses taxable?||No||No||Yes|
|Can you name a beneficiary?||Yes||Yes||No, but certain investments within the account can have a beneficiary. Segregated funds, as an exception, must have a named beneficiary.|
1 You can contribute to your own RRSP until December 31 of the year that you turn 71. You can contribute to a spousal RRSP until December 31 of the year that your spouse turns 71. RRSPs must be converted to a Registered Retirement Income Fund (RRIF) by December 31 of the year that you turn 71.
2 Since unused contribution room carries forward, you may be eligible to contribute more than the annual maximum. To find out your individual RRSP limit for the current year, check your most recent Notice of Assessment from Canada Revenue Agency (CRA). Annual contribution limits are also reduced by any existing pension adjustments from an employer-sponsored pension plan. Your limit may be less than 18% if you contribute to a company pension plan.
3 Anyone who was 18 or older in 2009, and has not yet contributed, will have $88,000 of contribution room available in 2023.
What are the benefits?
Bringing you more flexibility, non-registered investment accounts allow you to save as much as you want, when you want. You can withdraw any amount at any time and use the funds for whatever you’d like (be mindful that with a non-registered segregated fund, capital gains or losses may occur every time you move out of a fund). You can also choose from all types of investment options - like mutual funds, segregated funds, stocks, bonds and more - to diversify your portfolio and give your savings an added boost.
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