What's a non-registered account?

During my meetings with clients, I am often asked about what an "non-registered account" is.

Definition: An non-registered accountt is an investment account in which income is taxable when realized. It is sometimes referred to as a "taxable" or "open" account.

How does it work? An non-registered account can be an integral part of your financial plan. Generally, you must be at least 18 years old to open one, and you can use it throughout your life.

What are the advantages of having this type of account?

Flexibility:

Unlike Registered Retirement Savings Plans (RRSPs) or Tax-Free Savings Accounts (TFSAs), non-registered account do not have any contribution limits. You can deposit as much money as you want without penalties. They also have no withdrawal limits.

As mentioned earlier, anyone aged 18 or older can open this type of account. The beauty of it is that it is not subject to any age limit. Unlike an RRSP, which you must convert into a Registered Retirement Income Fund when you reach the age of 71. It could, therefore, be an interesting option for those aged over 71 or if you plan to keep your account past that age.

This strategy can also be useful if you have exhausted your contribution room in an RRSP or a TFSA.

Disadvantages:

Income generated and gains made in an non-registered account are taxable, unlike a TFSA, for example, where they are tax-free.

Your contributions to an non-registered account are not tax-deductible, which means you are not entitled to any tax deduction, as you would with an RRSP.

There can be tax consequences if you transfer funds from an non-registered account to a registered account (such as an RRSP, TFSA, or Registered Education Savings Plan).

There are two common types of non-registered account (cash and margin) that can be opened by individuals or spouses, but there are also many other possibilities.

These investment vehicles can hold mutual funds, exchange-traded funds, stocks, bonds, and various other products.

If you have any questions, please do not hesitate to contact us.

Source: Fidelity Investments