Weekly Tax Tips
When can I withdraw money from my RRSP?
14 May 2009
Generally, you can withdraw money from your RRSP at any time. There are no tax rules preventing you from doing so. The only exception to this is if the funds in the RRSP were originally transferred in from a pension plan. In certain cases, these funds must be transferred to a locked-in RRSP, which can only be accessed as allowed under provincial pension legislation.
From a practical perspective, you may have difficulty in withdrawing funds from your RRSP if it has invested in securities which cannot be liquidated, such as non-redeemable GICs. There may also be a cancellation penalty for early redemptions.
If you withdraw an amount from your RRSP, the full amount of the withdrawal is taxable. This is true whether the withdrawal represents money you contributed to your RRSP or income earned on these funds.
It’s generally not advisable to withdraw RRSP funds unless you have an emergency or your income is exceptionally low in one particular year. The purpose of your RRSP is to save for your retirement — withdrawing funds from your RRSP will only undermine this goal. Also, once funds are withdrawn, you will only be able to recontribute them as part of your normal RRSP contribution room.
For more information on RRSPs, click here to read our bulletin Answering Your RRSP Questions.
This tax tip is a publication of BDO Dunwoody LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 14 May 2009.
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