We offer 2 different types of accounts to hold your investments: registered accounts, like Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs), and non-registered accounts. While there are a few differences between registered and non-registered accounts, both can form part of a suitable investment plan.
Registered accounts
Registered accounts let you grow your investments while enjoying certain tax advantages. They have contribution limits, meaning you cannot put in more than a certain amount of money or you could face financial penalties.
- TFSA: If you've opened a new TFSA in 2024 and have previously never contributed to a TFSA, you would have a total contribution room of $95,000, but this amount will be less if you turned 18 after 2009, have lived outside of Canada as an adult, or removed any money from your TFSA this year. There is usually an additional amount that investors can contribute to their TFSA each year (the annual TFSA dollar limit for the year 2024 is $7,000), though it is decided each year by the Federal government. If you’re not sure how much you can contribute, log in to the Canada Revenue Agency site to see the exact contribution limits.
- RRSP: The total amount you’re allowed to contribute to an RRSP each year is proportional to your income, up to a maximum dollar amount that changes from year to year. If you don’t max out your RRSP limit each year, any unused contribution room carries forward to future years. The maximum amount you can contribute each year is the lesser of:
- 18% of your earned income from the previous tax year, or;
- The annual maximum amount set by the Canada Revenue Agency (CRA). For the 2024 tax year, the maximum is $31,560.
Another important thing to know is that RRSP accounts are tax-deferred rather than tax-free. That means you will eventually be taxed on the money you invest in an RRSP account (when you make withdrawals for example). To learn more about the fees applicable when withdrawing money from an RRSP account, you can refer here. With a TFSA you never pay any taxes, even when withdrawing.
For both types you should take care to track your remaining contribution limits and confirm them against those appearing on your account with the CRA. The burden to avoid over contribution is on the taxpayer and failure to do so can result in penalties.
For most people, RRSPs are the right type of account only when using the RRSP either:
- During high earning years to save toward retirement;
- Toward the Home Buyers' Plan (HBP) for first-time homebuyers;
- Under the Lifelong Learning Plan (LLP), or;
- If an investor has already maxed out contributions to their TFSA.
Non-registered accounts
Non-registered accounts are taxable but allow for much more flexibility, like the fact that they do not have contribution limits.
The type of account you decide to open with MogoTrade is entirely up to you, however, please note that you can open a maximum of 3 accounts. As well, since TFSAs and RRSPS are government-registered accounts, you’ll need to read and agree to the Declaration of Trust before we are able to proceed with the opening of your registered account. This document is available in the MogoTrade app as part of the registered accounts opening flow.