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Q. What is the best investment vehicle for me at this time? I am single, age 38 with a maxed out tax-free savings account (TFSA). I am a nurse earning $70,000 a year and am a forever renter. I do not see myself buying a home for the foreseeable future. I save about $12,000 annually.

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Should I open a registered retirement savings plan (RRSP) since I have about $60,000 in accumulated contribution room, or invest in a non-registered investment account? I am already part of a private pension plan through work for five years. Also, I have $90,000 in my TFSA and hold all-equity exchange-traded funds (ETFs) that have done quite well. If I open an RRSP, what would be the best investment strategy for me: continue with equities or do more of a 60/40 split with guaranteed investment certificates (GICs) in case an opportunity comes in the future to make withdrawals in a lower tax bracket? —Allison B. in North Bay, Ont.

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FP Answers: Allison, first of all, congratulations for having a maxed-out TFSA. Canada Revenue Agency (CRA) statistics show Canadians are not maximizing contributions to their plans. In 2020, only 8.9 per cent of TFSA holders had maximized contributions to their TFSAs, referring to an individual’s cumulative contribution room, not the annual dollar amount.

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A TFSA is a great way to save tax-free for many things. Some Canadians will save in their TFSA for short-term goals such as buying a car, for travel or home repairs. Others will invest in their TFSA for the longer term, aiming to increase their retirement nest egg or estate value at the end of life.

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There are several things to consider when looking at investment accounts. First, when will you need to use that money? And what are the tax consequences of depositing or withdrawing money to that account? In other words, what ‘job’ does the money need to do for you?

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While TFSA contribution room is not based on your income level, RRSP room is. TFSA room is set annually by the government while RRSP room depends not just on your income but on whether you are part of a pension plan that reduces your personal contribution room, such as in your situation. As well, it’s important to note that an RRSP will provide a tax deduction for the full amount of the contribution and is then taxed when you withdraw it. Alternatively, a TFSA is not taxed at any time.

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There are several programs around an RRSP that may be useful to some investors, like the Home Buyers’ Plan which allows you to withdraw up to $60,000 tax fee from your RRSP in order to buy a home. While this is not your goal, it could be helpful if you change your mind in the future. The RRSP also provides a Lifelong Learning Plan (LLP) where you can withdraw up to $20,000 from your RRSP for post-secondary education. Both programs require an annual repayment of some of the money, otherwise that annual portion is added to your income for that year.

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A non-registered account (also known as an open or margin account) has no restrictions on how much you can deposit and can hold any type of investment in it. For many people it’s an overflow account after RRSP and TFSA room is maximized.

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There are different tax options in a non-registered account depending on the investment chosen. Interest earned on non-registered investments is 100 per cent taxed in the year it is earned. Dividend income is also taxed in the year it’s earned but on Canadian dividends earned, there is a dividend tax credit that slightly reduces the tax owing.