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RRSP benefits

A Registered Retirement Savings Plan (RRSP) is one tool that can help you save for retirement. In most cases, the goal is to keep your money in an RRSP until you turn 71 years old.

However, some circumstances warrant withdrawing your funds early.

Depending on the situation, your withdrawal could be tax-deferred or subject to a withholding tax.

Here are five ways to benefit from your RRSP before you retire.

  1. Defer taxes. Investing in RRSPs will lower your taxable revenue. Making contributions to an RRSP can defer income tax payments until after you retire. You can contribute up to 18 per cent of your net income every year.

  2. Buy your first home. The Home Buyers Plan (HBP) allows Canadians to withdraw up to $35,000 to purchase their first home. This money is tax-free, but you must repay the full amount within 15 years. You’ll need to begin making payments two years after you take out your funds.

  3. Go back to school. The Lifelong Learning Plan (LLP) allows you to withdraw up to $20,000 tax-free. This money must be taken out over four years. It can be used to pay for courses for yourself, a spouse or a common-law partner. You will need to pay the money back within 10 years to avoid penalties.

  4. Bridge the gap before retirement. You can make an occasional lump sum withdrawal to cover the cost of living. These payments are treated as income, and a tax is withheld on the amount you take out.

  5. Pay off your debt. If you’re using a credit card with an interest rate of 20 percent or higher to pay off your debts, it might make sense to withdraw from your RRSP instead. It’s generally not advisable to pull out large sums of money since the more you take out, the higher the taxes you’ll pay. A withdrawal of $5,000 to $15,000 will incur a 20 percent withholding tax. Consult a professional to determine if this is the best solution for you.


D. & A. MacLeod Company Ltd. offers personalized solutions for debt problems, including assistance with credit counselling and consumer proposals, among other services. Our licensed insolvency trustees can stop collection agency calls by working with you to create a repayment plan to appease your creditors. Contact us today to speak with one of our licensed insolvency trustees.


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