What is the difference between registered and non-registered accounts?

When you invest your money, it’s important to understand the different types of accounts you can open and contribute to. Deciding between registered and non-registered accounts is the first step. Each has its advantages and disadvantages and this video will walk you through the different types of accounts to outline some key differences.

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Video transcript

As an investor, you have the option of holding your investments in a registered or non-registered account. Both can be important components of your investment portfolio and can be made up of several different types of investments. 

There are advantages and disadvantages to each type of account.

Registered Accounts 

A registered account is an investment account that is registered with the government and is given a tax advantage. Some examples of registered accounts include registered retirement, savings plans, spousal registered retirement savings plans, locked-in retirement accounts, registered education savings plans and tax-free savings accounts. 

  • Tax Implications: The main advantage of a registered account is that it allows you to grow your savings tax-free. Each type of account offers different tax advantages. 
  • Flexibility: Registered accounts are less flexible than non-registered accounts. Depending on the account, some have contribution limits, age limits, and withdrawal conditions making them more rigid. 
  • Estate planning: On certain registered accounts, like an RRSP, you can name beneficiaries. This allows the investment to transfer without becoming part of your estate, avoiding the probate process and fees. 
  • Legal protection: Some registered accounts are creditor-proof and offer legal protection, which can be beneficial. 

Non-Registered Accounts 

Non-registered accounts are not registered with the government, and although they do not offer the same tax incentives, they can be more flexible.

  • Tax implications: Non-registered accounts are taxed on their interest income, dividend income, and capital gains, depending on the type of investment. 
  • Flexibility: Non-registered accounts offer more flexibility than registered accounts. There are no age contribution or withdrawal limits, allowing you to tailor your investment plans to your needs.
  • Estate planning: You cannot name a beneficiary on a non-registered account. This means if it is not jointly held with someone else it will form part of your estate on death and must go through the probate process. This can take time and the accounts will be subject to probate fees. 

Which type of account is right for you?

Both registered and non-registered accounts have advantages and disadvantages. There are important differences between them when it comes to tax implications, flexibility, estate planning and legal protection. 

Which is right for you will depend on your unique situation. Talk to a financial advisor to learn more.