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Insights & advice

RRSP withdrawal rules

October 2022 – 15 min read

Key takeaways

  • You may take money out of your RRSP any time, but you’ll pay tax if you do

  • You may withdraw money for your education or to buy your first home without paying tax

  • You have options to withdraw money from your RRSP for your retirement.

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When you can withdraw money from your RRSP

As long as your RRSP isn’t a locked-in plan, you can take money out of your RRSP any time. 

However, any amount you withdraw will be included as income for tax purposes. You’ll also pay withholding tax on the amount you withdraw (based on the amount of the withdrawal). You’ll also lose the contribution room you originally used to make your RRSP contribution. 

For these reasons, and the fact you may be losing out on positive effect of compounding on your investment returns, taking money out of your RRSP before retirement can really impact your savings. It’s best to consult with your advisor before doing so.

Withdrawing money from your RRSP without paying taxes

If you’re buying your first home or paying for your education you may be able to take funds from your RRSP without paying withholding tax or including the funds in your income.

  • Home Buyers’ Plan (HBP)

    If you meet the Canada Revenue Agency’s (CRA) eligibility rules, you can withdraw up to $35,000 to pay for your first home.

    You must re-contrbute the money to your RRSP starting 2 years after you withdraw it, and you have 15 years to pay it all back, or include the amounts in your income. The CRA will send you an annual statement with your balance, payments made and the minimum payments for the next year.

  • Lifelong Learning Plan (LLP)

    To help pay for full-time education or training for you or your spouse or common-law partner, you may withdraw up to $10,000 per year to a lifetime maximum of $20,000 if you meet the criteria. 

    You have 5 years to begin re-contribute the money back to your RRSP, and 10 years to pay it all back, otherwise it will be included in your income. The CRA will send you an annual statement with your balance, payments made and the minimum payments for the next year.

Withdrawing RRSP money at retirement

You can keep contributing to your RRSP until Dec. 31 of year you turn 71. At the end of that year, you have 3 options to withdraw the money to use for your retirement.

Convert your RRSP to a RRIF

You can convert your RRSP to a registered retirement income fund (RRIF) at any age. However, once your convert it, you can’t change it back to an RRSP. 

Once you convert to a RRIF, you can start receiving payments from it. The CRA sets the minimum amount you must withdraw based on your age and a percentage of the market value of the RRIF. 

All money withdrawn from a registered account is fully taxable in the year you withdrawn it.  You’ll pay no withholding tax on the minimum amount you receive from your RRIF. You will pay withholding tax on RRIF amounts you receive over the minimum. 

Purchase an annuity

You can convert your RRSP to an annuity which can provide you with guaranteed income for a specific period of time or the rest of your life. 

You won’t pay withholding tax and the money you receive from the annuity is full taxable in the year you receive it. 

Lump sum withdrawal

You can withdraw all the money from your RRSP. You’ll pay withholding taxes and the full amount will be included in your income which could result in you paying a large amount of tax.

The RRSP withholding tax

This tax is withheld by your financial institutions when you take money out of your RRSP and passed to the CRA. The rate depends on how much you withdraw and the province where you live.

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.