1. RRSPs: Introduction
  2. RRSPs: The Benefits
  3. RRSPs: Eligibility
  4. RRSPs: Contributing - Part 1
  5. RRSPs: Contributing - Part 2
  6. RRSPs: Investment Eligibility
  7. RRSPs: Growth
  8. RRSPs: Withdrawals
  9. RRSPs: RRIFs
  10. RRSPs: Registered Plan Strategies
  11. RRSPs: Conclusion

By now, you should have a pretty good idea of how to put your money into an RRSP and what happens to it while it's there. But an important questions remains: How the heck do you get money out? There are a number of ways to make an RRSP withdrawal, but be careful: some withdrawal methods are more expensive than others! This section of the tutorial will tell you what you need to know about withdrawals.

The Canadian government developed RRSPs so that Canadian citizens could save money for retirement. They've since expanded the program to allow for saving for home purchases and education. However, the government doesn't want people using RRSPs to save money for vacations, sports cars, designer clothes or any other frivolous items. In fact, prematurely removing money from an RRSP to buy these sorts of things is punished with higher taxes.

Let's be honest here - you shouldn't be taking money out of your RRSP anyway. Think of the government's restrictions as a safeguard against yourself. You know that it's better to save for retirement, so view the money you contribute to an RRSP as untouchable until you actually retire.

What If I Use My RRSP Before I Retire?
Taking money out of an RRSP account before retirement can be very expensive because withholding taxes often apply. If you have an RRSP and you want to take money out of it for anything other than retirement, post-secondary education expenses or the purchase of a home, you'd be well advised to think twice before you run to the bank and make a withdrawal.

Withholding tax is the kick in the pants the government gives people for taking money out of their RRSPs without a good reason. Even if you think you've got a good reason for taking your money out of an RRSP, unless you're retiring, buying a house or going to school, the government maintains the position that you should leave your money where it is.

Withholding taxes are no fun. Take a look for yourself if you don't believe us.

If you take out…

In Quebec you pay…

In all other provinces you pay…

From $0 to $5,000



$5,001 to $15,000



Over $15,000



As you can see, the government doesn't look favorably on early withdrawals. And, unfortunately, the withholding tax is not the only penalty your withdrawal will incur.

If you're still thinking about taking money out of an RRSP early, consider this: once you've taken money out of an RRSP through an early withdrawal, you'll never be able to recontribute that amount. For example, let's say that your lifetime contributions to your RRSP total $15,000. Because you have not always made the maximum allowable contribution, you have also accumulated $30,000 in additional contribution room. If you withdraw the $15,000 and want to re-contribute that $15,000 at a later date, the re-contribution will reduce your $30,000 unused contribution room down to $15,000.

Can I Really Use My RRSP To Buy a House?
If you want to buy a house with the money you've socked away for retirement in an RRSP, you're in luck - the RRSP Home Buyer's Plan (HBP) is just what the doctor ordered. By using the HBP, RRSP contributors are allowed to borrow money from their RRSPs without being slapped with a withholding tax. The maximum amount that you can borrow from your RRSP is limited to $25,000. The other major restriction of the HBP is that you can't have owned a house in the last five years. Those who choose this option are given a 15-year period to pay back the money they borrowed from their RRSPs. Once 15 years have elapsed, however, the opportunity to replace the borrowed money is permanently lost.

The Home Buyer's Plan makes sense because of the huge amount of interest that must be paid on a mortgage. Borrowing from your savings will allow you to make a more substantial down payment, which enables you to: 1) avoid (or at least reduce) Canadian Mortgage and Housing Corporation (CMHC) mortgage insurance and 2) build the equity in your home faster.

RRSPs for Lifelong Learning
The Lifelong Learning Plan (LLP) is just like the RRSP Home Buyer's Plan - it's a way to borrow money from your RRSPs. But as the name implies, withdrawing under the Lifelong Learning Plan means that you have to use the money to go to school. As with the HBP, the maximum amount you're allowed to withdraw is $20,000, and only $10,000 can be withdrawn each year. Repaying an RRSP withdrawal from the Lifelong Learning Plan doesn't have to start until five years after the first withdrawal. Once your repayments begin, you will have 10 years to pay the money back to your RRSP before the opportunity to replace these funds is lost entirely.

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