Is it Better to Invest in RRSPs or in a Non-Registered
Account?
For most Canadian taxpayers, it is better to invest in RRSPs, because:
-
you will probably be in the same or a lower tax
bracket when you retire
-
your investment income grows tax-free inside the RRSP, so even if
you're in a higher tax bracket when you retire, you will be better off
-
you can invest in stocks, bonds, foreign and other
investments without worrying about the tax implications
-
you are less likely to withdraw the money than if you
are saving it in an unregistered account, so you will
build up a sizeable nest egg by retirement
- you can invest more because you'll have more after-tax funds to invest due
to the tax savings!
It may be better to invest in a non-registered account (but probably not) if:
-
you will be in a higher tax bracket after retirement,
and
-
you invest all your money in investments which
produce capital gains or eligible
Canadian dividends, and
-
you are comfortable not owning any bonds or other
interest-producing investments, and
-
you do not sell any investments until retirement,
because the sale would generate taxable capital gains.
Tax Tip:
most people should invest in RRSPs!
See Why
investing within an RRSP makes sense for tax purposes no matter what you believe,
by Jamie Golombek, FCA, FCPA, CFP, CLU, TEP.
TaxTips.ca Resources
Recommended
stocks/ETFs for inside or outside of your
RRSP
What is better - TFSA or RRSP?