Registered vs. Non-Registered Accounts: What You Need to Know
Understanding how tax benefits shape different investment accounts
When it comes to investing in Canada, accounts generally fall into two broad categories: registered and non-registered. Understanding the difference between the two is an important part of effective financial and tax planning.
When Canadians invest, their money is typically held inside either a registered or a non-registered account. While both types of accounts allow you to buy investments such as stocks, bonds, ETFs, and mutual funds, the difference between them becomes very clear once taxes come into the picture.
In this post, I’ll break down both account types so that even if you’re hearing about them for the first time, you can easily understand the purpose of each account and the benefits it provides.
What Are Registered Accounts?
Registered accounts are savings or investment accounts that are formally registered with the federal government. Because they are registered, they come with specific tax benefits designed to encourage Canadians to save for major life goals such as retirement, education, disability support, and home ownership.
In simple terms, the word registered describes the relationship between the account and the government.
The benefits these accounts provide can show up in different ways, including:
tax-deductible contributions and tax-deferred growth (for example, an RRSP)
tax-free growth (for example, a TFSA)
access to government grants (for example, an RESP or RDSP)
The key idea is that money inside registered accounts is given special tax treatment, which allows it to grow more efficiently over time compared to money held outside these accounts.
Two Key Aspects of Every Registered Account
Every registered account has two defining features:
A purpose, (what the account is designed to help you save for), and
A benefit (the tax incentive or government support tied to that purpose).
For example:
The RRSP exists to help Canadians save for retirement.
The FHSA is meant to help first‑time buyers save for a home.
The RESP is designed to help families save for their children’s education.
In addition to serving these primary goals, most registered accounts provide a direct tax advantage, that can either reduce taxes today, defer taxes until later, or eliminate tax entirely on certain growth or withdrawals.
To make this clearer, let’s look at the main types of registered accounts in Canada.
Types of Registered Accounts in Canada
1. Tax-Free Savings Account (TFSA)
Purpose: Allows Canadians to save and invest using annual contribution room. Unlike a typical savings account, funds can be used to buy investments such as stocks, bonds, ETFs, and mutual funds.
Benefit:
All investment growth is tax‑free, regardless of performance.
Withdrawals are tax‑free and can be made at any time.
Any amount withdrawn is added back to your contribution room the following year.
Unused room rolls forward indefinitely.
2. Registered Retirement Savings Plan (RRSP)
Purpose: Helps Canadians save for retirement. Contributions can be invested in a wide range of assets.
Benefit:
Contributions are tax‑deductible, reducing your taxable income.
Investment growth is tax‑deferred until withdrawn
3. Registered Retirement Income Fund (RRIF)
Purpose: Used at retirement by converting RRSP savings into a withdrawal plan.
Benefit:
Investments continue to grow tax‑deferred.
Mandatory minimum withdrawals apply each year.
4. First Home Savings Account (FHSA)
Purpose: Designed for first‑time homebuyers to save for a down payment. Annual contributions are capped at $8,000, with a lifetime maximum of $40,000.
Benefit:
Contributions are tax‑deductible (like an RRSP).
Investment growth is tax‑deferred.
Qualifying withdrawals for a first home are tax‑free (like a TFSA).
5. Registered Education Savings Plan (RESP)
Purpose: Helps families save for a child’s post‑secondary education.
Benefit:
Investment growth is tax‑deferred.
Contributions may receive government incentives such as the Canada Education Savings Grant (CESG).
6. Registered Disability Savings Plan (RDSP)
Purpose: Provides long‑term savings support for individuals living with disabilities.
Benefit:
Investments grow tax‑deferred.
Eligible contributions may receive the Canada Disability Savings Grant and in some cases the Disability Savings Bond.
There are also other registered plans, such as LIRAs, LIFs, DPSPs, and PRPPs, which are typically tied to workplace pensions or specific employment situations.
What Are Non-Registered Accounts?
Now that the registered accounts and their benefits are clear, it becomes easier to define a non‑registered account.
A non‑registered account is simply the opposite of a registered account. They are standard brokerage or investment accounts that do not come with government-provided tax benefits. This means that any income earned in these accounts, such as interest, dividends, or capital gains, is generally taxable in the year it is earned.
However, non‑registered accounts are still extremely useful, especially once you’ve maximized your registered accounts or need full flexibility with your money.
Bottom Line
Registered accounts, when used properly, can be powerful wealth‑building tools. Whether through:
Tax‑free growth (TFSA)
Tax deductions (RRSP, FHSA)
Tax‑deferred compounding (RRSP, RRIF, RESP, RDSP)
Government grants (RESP, RDSP)
…these accounts help Canadians save more efficiently and keep more of their investment growth.
Non-registered accounts still play an important role, especially when flexibility is needed, but they don’t offer the same tax benefits.
Understanding the difference between these two types of accounts is a game changer and can help you make better long-term financial decisions.