Ep 191 - Non-Registered Accounts: Why Your Withdrawal and Your Taxable Income Don't Match

In this episode, Joe Curry breaks down a common misunderstanding in retirement income planning: why your withdrawals don’t equal taxable income. Learn how non-registered accounts, capital gains, and tax-efficient withdrawal strategies can help you stay in a lower tax bracket and avoid OAS clawbacks.

Key Takeaways

Your total withdrawals are not the same as your taxable income, especially when using non-registered accounts.

Interest, dividends, and capital gains are taxed differently, with capital gains offering the most tax efficiency.

Only 50% of capital gains are taxable, creating a significant gap between cash flow and reported income.

Non-registered accounts provide flexibility to control your taxable income year by year.

Coordinating RRIF withdrawals, CPP/OAS, and investment income is key to minimizing taxes and avoiding OAS clawback.

Insights Worth Sharing

“Your withdrawals aren’t what get taxed—what happens inside the account is.”

“You can take home over $110,000 and still stay in a 29% tax bracket.”

“Non-registered doesn’t mean tax-free—but it does mean control.”

“Half your capital gain is taxable. The rest is just your money coming back.”

“It’s not about how much you have—it’s how you draw it down.”

The Truth About Retirement Taxes

If you’ve ever looked at your retirement income plan and thought, “That tax rate doesn’t make sense,” you’re not alone. One of the most common misconceptions I see is this: people assume that every dollar they withdraw in retirement is fully taxable. But that’s not how it works, especially when non-registered accounts are part of the plan.

Let’s walk through a simple example. Imagine you’re withdrawing about $112,000 per year in retirement. That includes CPP and OAS, RRIF withdrawals, and money coming from a non-registered investment account. At first glance, you might expect to be in a much higher tax bracket - somewhere around 37% or more. But in reality, your taxable income might only be around $80,000 to $85,000. That keeps you in a much lower marginal tax bracket, closer to 29%, and below the OAS clawback threshold.

So what’s causing the gap?

It comes down to how different types of income are taxed, especially inside a non-registered account. Unlike RRSPs or RRIFs, where every dollar withdrawn is fully taxable, non-registered accounts are taxed based on what happens inside the account, not what you take out.

There are three types of taxable income to consider:

Interest income, which is fully taxable

Dividends, which receive preferential tax treatment

Capital gains, where only 50% of the gain is taxable

That last point is where things get powerful.

If you sell an investment and realize a gain, only half of that gain is included in your taxable income. The rest of the withdrawal may simply be your original capital coming back to you - money you’ve already paid tax on. This creates flexibility. In higher-income years, you can lean more on non-registered accounts or TFSAs to avoid pushing yourself into higher tax brackets or triggering OAS clawbacks. In lower-income years, you can intentionally realize gains or draw more from RRSPs or RRIFs to make use of lower tax brackets.

That’s what tax-efficient retirement income planning is all about. Coordinating your withdrawals across different account types to manage your tax bill over time. Because at the end of the day, it’s not just about how much income you generate. It’s about how much of that income actually shows up on your tax return. And when you get that right, the impact over a 25–30 year retirement can be significant.

Learn more about our retirement planning process at MatthewsAndAssociates.ca.