There are many different terms to be familiar with when it comes to investing, but two essential ones you should know are registered and non-registered investments. Each has its own place in an individual’s investment portfolio. So, it’s important to understand the difference between them and how they can help with your financial goals.
Registered Investments are investments that are registered with the government and enjoy tax-deferral or tax-sheltered status. Examples of registered investments are Registered Retirement Savings Plans (RRSP), Tax-Free Savings Accounts (TFSA), Registered Retirement Income Funds (RRIF) and Registered Education Savings Plans (RESP). In the case of an RRSP, contributions can be claimed against your income each year during tax season. In this way, the money in an RRSP will be taxed when it’s withdrawn at a later date and, hopefully, at a lower tax bracket.
Non-registered investments, on the other hand, aren’t registered with the government. Because of their unregistered status, they don’t have the same limits or regulations as registered investment vehicles. Registered investments have limits on the maximum amount you can invest per year, as well as age restrictions. And for RESPs, they can have limits on the amount the government will contribute annually. A non-registered investment doesn’t have these restrictions.
Income earned in a non-registered investment is taxed along with your income each year because, unlike registered investments, they don’t enjoy the same tax-deferral or tax-sheltered benefits. Although income earned in non-registered investments is taxed, only 50% of your capital gains from a non-registered investment can be taxed at your tax bracket. This can all be a bit tricky during tax season, which is why speaking with an investment advisor, or financial advisor, can be so beneficial when you start investing in both registered and non-registered investments.
In a perfect world, you would have a variety of both forms of investments. Due to the maximum contribution rules placed on many registered investments, non-registered investments are a perfect way to continue saving and investing your money past these limits. Non-registered investments can offer more freedom and flexibility outside of regulations and stipulations and are perfect places to be exploring more alternative investment avenues. Having both registered and non-registered investments in your portfolio is yet another way of diversifying your portfolio and can mitigate your risk of large financial loss.
The largest challenge when it comes to deciding on how to invest, in registered and non-registered investments, is related to how it will affect your taxes, both now and down the road. The best thing you can do for yourself is to speak with a financial advisor or investment advisor about your specific situation and goals. This will help you to better understand what would be an ideal strategy for your current income bracket, and how the two can work together towards your financial goals.
Cooper Pacific is here to help people better understand alternative investments. Some Mortgage Investment Corporations (MIC) allow investors to partake in tax deferral benefits when investing in a mortgage pool through an RRSP, a TFSA, or similar. Mortgage pools are an excellent option for investors as they can be either registered or non-registered depending on the qualification status of the MIC you choose. At Cooper Pacific, it’s up to the investor to choose what kind of investment they want to participate in: registered or non-registered. We don’t charge any fees for registered plans and allow investors the freedom to choose which type of investment is right for them. If you want to learn more about MICs and how this kind of investment can benefit you, get in touch with Jordan on our team today.