Tech Director in New Brunswick with $250K Severance: Non-Registered Investment and Capital Gains Tier Planning in 2026

The Scenario: Marcus Okafor, 48, Tech Director, Saint John NB

Marcus Okafor spent 12 years as director of engineering at a mid-size SaaS company headquartered in Saint John. The company restructured its Canadian operations in March 2026, eliminating his position along with two other senior roles. His separation package: $250,000 in severance, paid as a single lump sum on April 1, 2026. Base salary before the layoff: $180,000 plus a modest equity vest that had already been exercised.

His employer's payroll system withheld $75,000 in federal tax — the mandatory 30% on lump-sum payments above $15,000. The deposit hitting his account was $175,000. He had earned $45,000 in regular salary from January through March before the layoff, bringing his 2026 gross income to $295,000 before any deductions.

Marcus's financial picture at layoff: $185,000 RRSP balance, $72,000 TFSA (leaving $37,000 of unused cumulative room based on the 2026 limit of $109,000 for someone eligible since 2009), $95,000 in a non-registered brokerage account holding a mix of Canadian bank stocks and US-listed tech ETFs, a home in Saint John worth approximately $420,000 with $140,000 remaining on the mortgage at 4.2%, and $12,000 in a RESP for his two children. His CRA Notice of Assessment shows $58,000 of unused RRSP contribution room.

Monthly fixed costs: $4,800 including the mortgage. The $175,000 net severance covers 36 months of living expenses — but only if none of it gets deployed into long-term investments. The tension is obvious: every dollar kept liquid for cash-flow safety is a dollar not compounding in a tax-advantaged or tax-efficient account.

The Registered Account Ceiling: Why $250K Overflows

The first priority in any severance deployment is to fill registered accounts — RRSP and TFSA — where investment growth is either tax-deferred or tax-free. But $250,000 exceeds what these accounts can absorb in a single year by a wide margin.

Marcus's registered capacity:

• RRSP unused room: $58,000 (from his CRA Notice of Assessment). Contributing the full $58,000 against $295,000 of 2026 income drops his taxable income to $237,000 — pulling a significant portion below higher marginal brackets. At the top NB combined rate, this contribution saves approximately $28,000–$29,000 in tax.
• TFSA unused room: $37,000 (cumulative $109,000 minus $72,000 already contributed). No tax deduction on contribution, but all growth and withdrawals are permanently tax-free.
• Total registered capacity: $95,000
• Excess after registered accounts: $250,000 − $95,000 = $155,000 that must go non-registered

Even using every dollar of available RRSP and TFSA room, Marcus has $155,000 that cannot be sheltered. This is the money where investment selection — not account type — determines tax efficiency.

Non-Registered Investing: The Capital Gains Tier Changes Everything

In a non-registered account, three types of investment income are taxed at dramatically different rates:

For Marcus, the $155,000 going into a non-registered account will likely compound for 17 years before he touches it at age 65. If the portfolio doubles to $310,000, the $155,000 capital gain falls entirely within the 50% inclusion tier — only $77,500 gets added to his taxable income in the year he sells. At a combined NB marginal rate of approximately 47–50% on that income, his effective tax on the gain is roughly 24–25%. Compare that to the same $155,000 held in GICs earning 4.5% annually: $6,975 of fully taxable interest every year, taxed at 47–50%, costing $3,300–$3,500 in annual tax — paid every April regardless of whether he needs the money.

The capital gains approach defers the tax for 17 years and then taxes only half the gain. The interest approach pays full tax every year with no deferral. Over 17 years, the compounding difference on $155,000 is in the range of $40,000–$60,000.

The Deployment Sequence: $250K in Four Buckets

The order matters. Each bucket fills before the next one opens.

The $28,000 RRSP refund arriving in May 2027 replenishes the emergency fund and extends Marcus's runway by another 6 months. Combined with the $30,000 HISA buffer, he has 12 months of living expenses without touching any invested capital.

Building the Non-Registered Portfolio: What Goes Where

The $125,000 non-registered allocation is Marcus's largest single bucket. Here is the tax-efficient construction:

• Canadian equity ETFs (40–50%): Holdings like broad-market Canadian index funds pay eligible dividends that benefit from the federal and NB dividend tax credit. The effective tax rate on eligible dividends in NB is significantly lower than on interest income. Capital gains on disposition are taxed at the 50% inclusion rate.
• US/international equity ETFs held in Canadian-listed wrappers (30–40%): Canadian-listed ETFs that hold US equities avoid the need for a US brokerage account and the W-8BEN complexity. Growth comes primarily from capital appreciation, taxed at the 50% inclusion rate on sale. Foreign dividends are taxed at full marginal rates with no dividend tax credit, so prioritize ETFs with lower distribution yields.
• Return-of-capital distributions (10–20%): Certain covered-call or split-share ETFs distribute return of capital, which reduces adjusted cost base rather than triggering immediate tax. This effectively defers tax until sale — useful for the decade-plus holding period Marcus is planning.

What stays out of the non-registered account: GICs, bond ETFs, and money-market funds. Interest income is the worst-taxed form of investment return. If Marcus wants fixed-income exposure, it belongs inside the RRSP where the interest is tax-deferred, not in the non-registered account where every dollar of interest is taxed at his full marginal rate.

Asset location vs. asset allocation

This is the distinction most severance recipients miss. Asset allocation decides how much risk you take (60% equity, 40% fixed income). Asset location decides which accounts hold which assets to minimize tax. The optimal location for Marcus:

• RRSP ($243,000 total after contribution): Hold bonds, GICs, and US equities here. Interest and foreign dividends are taxed at full rates when withdrawn, but the deferral inside the RRSP shelters them for decades. US equities held in an RRSP are exempt from the 15% US withholding tax under the Canada-US tax treaty — a benefit not available in a TFSA or non-registered account.
• TFSA ($109,000 after top-up): Hold the highest-growth assets here. Growth is permanently tax-free, so you want maximum compounding — aggressive equity positions, small-cap exposure, or any asset you expect to appreciate the most.
• Non-registered ($125,000 + existing $95,000): Hold Canadian equities for the dividend tax credit and equity index funds for capital gains treatment. No bonds, no GICs, no money-market funds.

The NB Probate Layer: $5 per $1,000

New Brunswick probate fees are $5 per $1,000 of estate value, calculated on the full estate with no exemption threshold and no maximum cap. On a $1,000,000 estate, probate costs $5,000. On $2,000,000, it costs $10,000.

Compared to other provinces, NB sits in the moderate range:

At $5,000 on $1M, NB probate is not catastrophic — but it is avoidable on most assets Marcus holds. RRSPs, TFSAs, and life insurance policies with named beneficiaries pass outside the estate entirely. The non-registered brokerage account is the main probate-exposed asset. If Marcus holds it jointly with a spouse (with right of survivorship), or if his brokerage allows a beneficiary designation on the account, the full value bypasses probate. Structuring this at age 48, not age 75, avoids the scramble later.

EI Reality: The 72-Week Allocation

Service Canada divides the $250,000 severance by Marcus's normal weekly earnings ($180,000 ÷ 52 = $3,461/week) to calculate an allocation period of approximately 72 weeks. Add the 1-week mandatory waiting period, and EI benefits would not begin until roughly 73 weeks after his last day — pushing the start date into mid-2028.

When benefits do eventually start, the maximum weekly EI benefit in 2026 is $728 (55% of insurable earnings up to the $68,900 maximum insurable earnings). For a director earning $180,000, the $728 weekly cap represents a fraction of his prior income.

The practical takeaway: Marcus should build his entire cash-flow plan assuming EI pays nothing. The severance is his runway. If EI eventually arrives, it is a bonus, not a foundation.

The Retiring Allowance Question

Under Section 60(j.1) of the Income Tax Act, a portion of severance qualifying as a retiring allowance can be rolled directly into an RRSP without using contribution room — but only for years of service before 1996 ($2,000 per year), plus an additional $1,500 per year of service before 1989 where the employee was not vested in a registered pension or DPSP.

Marcus joined his employer in 2014. All 12 years of service are post-1996. His eligible retiring-allowance rollover is $0. This is the case for virtually every tech worker in Canada born after 1978 — the Section 60(j.1) rollover is a legacy provision that benefits long-tenured employees from an earlier era. For Marcus, the entire $250,000 is ordinary employment income, and the only RRSP shelter available is his regular unused contribution room.

Common Errors on a $250K Severance — and What They Cost

Four mistakes recur in high-severance files, each with a measurable dollar cost:

1. Parking the full $175,000 in a HISA "until things settle": Every month the RRSP contribution is delayed past December 31, 2026, is a month where the deduction cannot be claimed against the highest-income year of Marcus's career. Missing the filing deadline forfeits $28,000 in tax refund for the 2026 tax year. Cost: $28,000.
2. Holding bonds and GICs in the non-registered account instead of the RRSP: Interest income taxed at approximately 50% marginal rate versus capital gains taxed at an effective 24–25% rate. Over 15 years on $125,000, the wrong asset location costs approximately $30,000–$45,000 in unnecessary tax.
3. Ignoring probate planning on the non-registered account: A $220,000 non-registered account (existing $95,000 + new $125,000) with no beneficiary designation costs $1,100 in NB probate at death — avoidable with a single beneficiary form filed at the brokerage.
4. Realizing $300,000+ in capital gains in one year by selling everything at retirement: The first $250,000 is included at 50%, but the excess $50,000 jumps to 66.67% inclusion — adding roughly $8,335 more to taxable income than if the sales were split across two calendar years. Staggering dispositions across December and January of consecutive years keeps each year under the $250,000 tier. Cost of not staggering: $4,000–$5,000 in additional tax.

The 17-Year Compound Math

Marcus is 48. If he re-enters the workforce within 12 months and does not touch the severance investments until 65, the $125,000 non-registered portfolio has 17 years to compound. At a 6% average annual return:

• $125,000 at 6% for 17 years: approximately $337,000
• Capital gain at sale: $337,000 − $125,000 = $212,000 (fully within the 50% inclusion tier if sold in a year with no other large gains)
• Tax on gain (50% × $212,000 = $106,000 included, taxed at approximately 47%): ~$50,000
• After-tax proceeds: approximately $287,000

Compare that to the same $125,000 held in a HISA at 4% for 17 years with interest taxed annually at 47%: approximately $210,000 after tax — a $77,000 gap driven entirely by the capital gains inclusion advantage and tax deferral.

Combined with the RRSP ($243,000 growing tax-deferred) and TFSA ($109,000 growing tax-free), Marcus's total registered and non-registered portfolio at 65 exceeds $900,000 from the severance deployment alone — before any contributions from his next job.

Marcus's File: The 90-Day Sequence

Here is what a well-executed severance deployment looks like over the first 90 days:

1. Day 1: File for EI. Start the 72-week allocation clock immediately.
2. Day 1–7: Move $30,000 to a high-interest savings account as the emergency fund. Do not touch it for investments.
3. Day 7–14: Contribute $58,000 to RRSP using the full unused room. Claim the deduction on the 2026 T1 return.
4. Day 14–21: Contribute $37,000 to TFSA, filling all unused cumulative room to the $109,000 ceiling.
5. Day 21–30: Open or fund the non-registered brokerage account with $125,000. Build the tax-efficient portfolio: Canadian equities for dividend tax credit, equity index ETFs for capital gains deferral. Add a beneficiary designation to avoid NB probate on the account.
6. Day 30–60: Review asset location across all accounts. Move any bonds or GICs from non-registered to RRSP. Move highest-growth positions to TFSA.
7. Day 60–90: File a T1213 request with the CRA to reduce withholding at source if Marcus starts a new contract or consulting role — the $58,000 RRSP deduction means his 2026 taxable income is significantly lower than payroll would assume.

Marcus's file ends well because the math was done in the first 30 days, not the first 30 months. The $28,000 RRSP refund arriving in May 2027 extends his emergency runway without selling a single investment. The $125,000 non-registered portfolio compounds at the 50% capital gains inclusion rate for 17 years. And the NB probate exposure on $220,000 of non-registered assets is neutralized with a single beneficiary designation form.