RRSP Withdrawals and Taxes

Are you withdrawing funds from your RRSP in order to make ends meet? Read on.

In these tough economic times many companies are going bankrupt and the unemployed workers are having difficulty finding other jobs. As a result, after their Employment Insurance (EI) payments stop, some people are taking funds from their RRSP to cover day-to-day expenses.

This is a reminder that all funds withdrawn from your RRSP are subject to withholding taxes. The rates for all provinces, except Quebec, are as follows:-

10% up to $5,000
20% from $5,001 to $15,000
30% on amounts over $15,000

Subsequently, you will receive a T4RSP for the amount withdrawn and will have to report it as income on line 129 of your income tax return. It also means that you'll have less funds available for retirement, the time when you need it most.

Therefore, dipping into your RRSP should be done as a last resort because of the tax implications and the impact it can have on your financial future.

Pauline Bourne, F.L.M.I.
Your Finance & Family Consultant

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