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Withholding Tax on RRSP Withdrawals: What You Need to Know

Withholding Tax on RRSP Withdrawals: What You Need to Know

One of the benefits of an RRSP is having the flexibility to withdraw some of the money before retirement. However, even though you can withdraw money from your RRSP prior to retirement, it doesn’t mean that you should. The action comes with a cost. That cost is a withholding tax.

RRSP withholding tax is the amount that the bank is required to submit to the CRA on your behalf. When you withdraw money from your RRSP, you are required to pay taxes, so the bank holds back a portion of your withdrawal and forwards it on.

Since withdrawn RRSPs are considered income in that year, the withholding tax is similar to your employer withholding a portion of your income to submit for your tax obligations.

How Much Withholding Tax Will You Pay?

The amount you pay in RRSP withholding tax is dependent on the amount of your withdrawal. There are three tiers, as follows:

  • Withdrawals up to $5,000 will have a 10% (5% in Quebec) withholding tax.
  • $5,001 to $15,000, 20% (10% in Quebec) withholding tax.
  • $15,001 or more, 30% (15% in Quebec) withholding tax.

RRSP Withholding Tax For Non-Residents

Non-residents of Canada pay a withholding tax of 25%, except in places where that amount is reduced by treaty. In other words, living outside of Canada could cost you if you decide to withdraw your RRSPs.

Obviously there is a benefit to keeping your individual withdrawals to $5,000 or less. You will pay less in withholding tax. However, if you need more money, you may have no choice but to pay the higher amount in tax.

While you might think it’s beneficial to have access to the money inside your RRSP throughout the year, keep in mind that the withholding tax rate is separate from your marginal income tax rate.

The Impact Of An RRSP Withdrawal At Tax Time

In addition to the withholding tax paid, you will have to claim your RRSP withdrawal amount as income, come April 30th.  For example, let’s say you withdraw $5000 and incur an RRSP withdrawal tax of 10%.

If your marginal tax rate for the year is 20%-50%, you could end up owing the government quite a bit more at tax time than the 10% you have paid so far.

The $5000 that you withdrew must be included in your overall income and will be taxed at your marginal rate.

To avoid this, you would need to be in a position where your overall income for the year was very, very low. More on this a bit later.

If you are withdrawing RRSPs for retirement, or any other time you are in need of income, you should know your marginal tax rate so that you will be prepared for the amount of tax you will still need to pay.

The website TaxTips has personal income tax rate tables which illustrate marginal tax rates, province by province, at all income levels.

The Opportunity Cost Of Withdrawing RRSPs

The impact of an RRSP withdrawal on your income tax situation isn’t the only cost associated with withdrawing RRSPs. You also have to consider the opportunity cost.

In other words, as soon as you withdraw funds from your RRSP, the money is no longer there, working on your behalf. You no longer have that capital in your account building your wealth. You can’t get that lost time back, and the interest you would have earned, even if you replace the capital at a later date.

Here’s a simple example, to illustrate the opportunity cost of a premature RRSP withdrawal:

Let’s say you withdraw $10,000 from an RRSP at age 45.

At a 20% withholding tax rate, you’ll receive a net amount of $8000. For simplicity’s sake, we’ll assume that your income tax situation is such that you have no other tax consequences related to the original $10,000 withdrawal, outside of the $2000 withholding tax.

Now, had you left that $10,000 growing in your RRSP until your retirement at age 62, you would have experienced an additional 17 years of tax-sheltered growth.

If we use an assumed rate of return of 5% annually, (reasonable for a broad-based equity investment), that $10,000 would be worth $22,920 by the time you retire at age 62.

In this scenario, your opportunity cost could be as much as $14,920, if you realized $8000 from your RRSP withdrawal at age 45.

This is why it’s so important to consider all of your options before you decide to withdraw from your RRSPs.

Depending on your situation, it might even make more financial sense to borrow money from a term reducing loan, if you can do so at a reasonable rate.

Either way, make sure you consult with a knowledgeable financial professional who can help you figure out the best way to go about making your withdrawals, and who can help you plan for your tax payments.

How To Avoid RRSP Withholding Tax

There are two common scenarios that allow you to avoid RRSP withholding tax. The first is by withdrawing funds under the First Time Home Buyers’ Plan, the other through the Lifelong Learning Plan.

Let’s take a quick look at each of these government programs:

The Lifelong Learning Plan (LLP)

The Lifelong Learning Plan is a federal government program that allows you to borrow a limited amount of money from your RRSP to pay for your post-secondary education.

The funds are withdrawn without triggering withholding tax, but they must be repaid into the RRSP over several years. When you make an LLP withdrawal, you also do not have to claim the amount as income at tax time.

The Home Buyers’ Plan (HBP)

The Home Buyers’ Plan is another popular government program that enables first-time home buyers to withdraw funds from their RRSP to go towards the down payment on the purchase of a home.

Similar to the Lifelong Learning Plan, there is no withholding tax collected at source on the withdrawal, and funds are not considered as taxable income.

However, funds withdrawn must be repaid into the RRSP over several years. If repayment is not made, the home buyer will be penalized by CRA.

With today’s costs of both housing and a post-secondary education being so high, these programs can be very valuable. Remember though, while they allow you to avoid the income tax on RRSP withdrawals, you will still incur an opportunity cost.

Withholding Tax and Low-Income Individuals

Every Canadian taxpayer receives a basic personal income tax credit. In 2018, the amount is $11,809, meaning that you won’t pay any federal tax on an income below that amount. Since the RRSP withholding tax is refundable on your tax return, like any other tax paid throughout the year, those with low income can get the withholding tax back.

If you make an RRSP withdrawal during a year when your annual income happens to be very low, you could receive up to the full amount of withholding tax back in the form of an income tax refund.

This might apply if you are a stay-at-home parent not earning income, you suffer a job loss, or are away from work for an extended period, say a personal or maternity leave.

If an RRSP withdrawal is necessary, a year in which you’re earning little to no income may provide the best opportunity to do so. As they say, timing is everything.


RRSPs are an important part of an effective retirement savings strategy, but making withdrawals at any stage can be costly. As such, it’s important to understand the impact an RRSP withdrawal will have on your personal financial situation, including how withholding tax is applied.


  1. Ray Fortier

    What are the rules for making several RRPS withdrawals through the year in the mount of $5000 each.

    • Tom Drake

      Ray Fortier,

      That’s what you need to watch out for when withdrawing. If you were to withdraw multiple amounts of $5,000, only $500 (10%) would be withheld for taxes. But come the end of the year, you’re going to owe based on the total. So while only 10% was withheld, depending on the total income for the year you might had a tax rate of maybe 30%. Whatever the amount, you will owe based on the total.

      That said, there’s still a benefit to taking out the money $5000 at a time. It’s basically an interest free loan from the government, since you won’t have to pay your full taxes until the spring.

  2. Andy Trottier

    I deal with Scotia McLoed and they add up your $5,000.00 withdrawals. The first is a 10% withold, the second and third will be a 20% withold each and any further $5,000 will see a 30% withold. They claim CRA requires this practice.

    • L Brady

      I deal with ATB Securities and they have just told me the same thing. They said because I did two withdrawals in a 35 day period, it was 20% tax withheld. I am challenging that as I have been unable to find anything on the CRA’s website for individuals or Plan Administrator that states this is so. I guess I’ll be checking with the AB Securities Commission next!

      • Walter Lord Charest

        Both comments above are correct….I challenged TD Waterhouse on this same issue and lost. If you wish to bypass this issue, you will need to withdraw your $5,000 every 90 days after the last withdrawal. For example you can withdraw $5,000 on January 9th and another $5,000 on April 9th and another $5,000 on July 9th and so on… Under those conditions, they withhold 10% and not accumulate the quarterly totals. TD Waterhouse and the CRA has accepted this methodology.

  3. Rose

    If someone’s income is below the poverty line and they withdraw what they have in RSPs (below $5000), would the withholding tax paid on the RSP withdrawal be refunded with an income tax return?

    • Chris

      I have a similar question to Rose. What if your marginal tax rate is lower than the witholding tax rate, will you only be refunded the difference on the withdrawal of funds or will you be charged the full amount of the witholding tax but not charged again at tax time?

      • Austin

        Hope this helps- not sure how long ago this reply was sent as there is no date on it….

        “Payments subject to withholding

        In general terms, a payment from a RRIF in excess of the “minimum amount” is subject to tax deductions at source using the lump-sum withholding rates noted below.

        The withholding amount is normally computed on the excess portion of each individual lump-sum payment. However, if withdrawals are in the nature of instalments made in fulfillment of a single request by the annuitant, it is the Canada Revenue Agency’s (CRA) position that the rate of withholding on each individual payment should be based on the total sum requested and not on each individual payment. In these situations, the CRA considers these periodic payments to be blended payments (i.e. part minimum amount and part instalmentor excess). Accordingly, the latter portion would be subject to withholding tax at the rate that would apply had the annuitant ‘elected’ to receive one lump-sum payment in the year equal to the amount by which the total instalment payments in the year exceed the minimum amount for the year.

        In a situation where an annuitant receives monthly instalment payments and submits a request for an additional amount during the year, the CRA views this as a separate request and only requires withholding on the excess portion of that specific payment regardless of the amount of the ongoing instalment payments. However, where it appears that an annuitant is making separate requests in order to minimize the income tax withheld, for example, where a series of requests are made in a short period of time, it is our position that the withholding rate should be determined as if there was one request equal to the total of all amounts requested. Thus, a higher withholding rate could apply. We suggest payers use their discretion since it is sometimes difficult to apply these rules in these situations.

        Note: It may be advantageous to the annuitant’s overall tax liability if the tax rate applicable to the aggregate of the payments for the year is used rather than the lower rate determined on the additional withdrawal.

        Use the rates listed under the heading “Withholding Rates.” “

        • David

          Was hoping that Tom would answer this question as I have same question as Rose and Chris and their question was not answered

          • Gee

            Had this exact situation last year – tax withheld at withdrawal time of RRSP funds. The withheld amount is a simple credit on your T1 (line 437 on page 4 )- you also get a T4RSP slip – if taxes owed are less than the withheld amount you get a refund; if taxes owed are greater you must pay the difference.

            Also note that if your owed tax amount exceeds $2000 you could be facing quarterly installments payments.

            Optimally you withdraw RRSP funds late in the year (December) to shorten the time your withheld funds are in the government’s hands.

            The multiple withdrawals of < $5K to minimize withheld will also incur a fee for each withdrawal – at TD it's $25 + HST (of course!) and TD also aggregates withdrawals and and changes withhold percentages.

            They got you coming and going 🙂

  4. Sherry Campbell

    Hi Tom,
    I was hoping you could give me a little insight on my GIC. I had a GIC at the TD (truly disgusting) Canada Trust bank mature after 5 years in the amount of 1413.91. It made ZERO interest in that time. Once I was finally able to unlock it, they took 243.09 off of the total, that is over 17% in tax. My bank is not giving me any answers so I hope you could tell me if that is correct or not.

    Thank you very much,

    • Doug

      You may have has a GIC but was it in an RRSP??
      If so it was taxed as income when you took it out.

    • Rob

      Just a head`s up on redeeming RRSPs in general. Most financial institutes charge a redemption fee for partial or complete withdrawl.It can range from $50-over 100.So what people think are tax withholdings, might be high redemption fees.

      • Mary Cudmore

        Yes, my son just found that out. His car muffler went and he thought he would take money out of his RRSP to pay for it. It is highway robbery as ScotiaBank charged him a $50.00 fee and also the withholding tax. He had over $2,200.00 invested there for ten years and hardly made any interest. How fair is that when the banks charge inflated fees like that which wipe out all the interest he earned during that period. They sure don’t explain that to you when you open the RRSP. I had to call an agent to direct me where the rules were concerning those RRSP withdrawals. It was buried in small print on page 53 of an investment manual or pdf on line. Is there any Canadian banks that do not charge a withdrawal fee but just the withholding tax?

  5. Dan

    I have an interesting question. I’m a person that likes to work for a few years, then quit and travel on my savings for a few years. I’m thinking about using an RSP to “average out” the taxes I pay. I’ll show you what I mean, using round numbers and rough estimates to keep the math easy.

    Option 1) Lets say I earn $100k for three years, paying 40% tax, meaning I’ve paid $120k in tax in the 3 years. Then I travel for 3 years, so I’ve paid $120k in taxes over 6 years and have $180k in “savings”. (obviously not taking into account expenses while earning the money – kind of irrelevant to this discussion)

    Option 2) While working, I contribute the maximum allowable amount each year to my RSP (let say $20K/year), so I pay taxes on $80k a year (which might be 30% or $24k) so after three years I’ve paid $75k in taxes, have $60k in RSP and $165k of “savings”. For the next three years I quit (thus earning $0), but withdraw $20k a year from the RSP, meaning my only taxable income is the $20k withdrawal from the RSP, which I pay low tax on, lets say 20% or $4k.
    So after 6 years I’ve paid a total of $87k in taxes and will have $213k to spend.

    If that works (roughly) I will have “averaged” my income over the 6 years and reduced the amount of tax I paid by roughly $33k.

    Will that idea work?


    • Danielle

      I was just looking for the same information as Dan above. My husband and I work for a few years and then travel for a few years with our family and we were wondering if contributing to them and then using during our traveling years would be a smart idea. We would plan to withdraw only just about the poverty line for a family each year. I would love to hear the answer to Dan above.


      • Dan

        Hey Danielle,

        (I’m the same Dan you’re replying to)
        I’ve been doing a ton more research into this, and I think I can help you with an answer.

        I found a blog a while ago which actually suggested doing what I proposed if you have an income that fluctuates (they gave the example of a contractor, or a laborer that has boom and bust years). Sorry, I don’t have the link, but it was nice to see someone else confirming the idea.

        Anyway, I asked at all my local banks, etc. and they basically get a blank look on their faces and don’t really get the whole point. The long and short is you can absolutely do what I suggested, it will work exactly as I suggested. I’ve been running the numbers every which way I can, and it looks like this is going to save me about $8k-$9k in taxes every “working” year, if I then withdraw only $10k from the RSPs in my “non-working” years (the first $10k is completely tax free).

        There are a couple of things to keep in mind:

        1. (This is the biggest downside). The amount you can contribute to RSPs is based on your income (18% to a max of $18k), and you never get to re-contribute anything you withdraw. So lets say you put in $15k for three years, then take that same amount out over the next three non-working years. When all is said and done, you’ve taken $45k out of your RSP that you’ll never be allowed to put back in. Anyone doing “long term” retirement planning will tell you this is a bad thing, because it means you’ll have less in your RSP when you finally decide to retire. I don’t care, because of the way I work on/off, etc., I’m not planning on ever “retiring” in the traditional sense. (I’ll work when I have to, and not when I have to, even after 65)
        You should think hard about if this is a concern to you.

        2. This whole plan of work/non-work will never be recommended to you, and you’ll probably never find anyone that can answer the question about using your RSPs to average out your taxes over many years. This is not the recommended approach, so they are going to try and tell you you should be working your entire life until retirement, when you want to have as much in there as possible. Keep that in mind when getting advice.

        Otherwise, yes, it will absolutely work.


        • Danielle

          Hello Dan,

          Thanks for your answer. I believe I messaged you on facebook. Sounds like we live a similar lifestyle. Hubby and I dont plan on Retiring the traditional way either. I was just wondering if we could use this method for a tax break and in our lean years take it out by minimizing our withholding percentage.

          • Danielle

            Also should have said you answered my question perfectly. I appreciate it very much. I have come across mention of this in various finance magazines but never with any details. Upon asking a financial advisor they said they hadn’t heard of such a thing. So thank you for investigating this for us folks who live a little outside of the box.

          • Brett

            Yes, good answer – you do lose the room, might be a consideration for people who have maxed their RSP contributions. Suggest taking up to a minimum tax bracket and putting anything you don’t use in a TFSA so you get the maximum benefit of the year(s) off too…

        • Brian L.

          Please also look into Tax Free Saving Accounts. Any money you put into them can be withdrawn tax-free, and your next-years contribution limit increases by the amount you took out. I buy U.S. dividend paying equities from my TFSA, and I let all the dividends accumulate. I will be able to withdraw them and use them to live off, without paying any taxes. A small caveat… U.S. paying dividends are currently subject to a 15% withholding tax at the source. But hey, the stock I am holding is paying 15% right now, so my real tax is 15% of 15%. I am still making round 13% after taxes. Compare that to banks, paying 2% or less.

          • Dan


            The huge difference is you are still paying income tax on the money before you put it into your TFSA, which for me is ~30%.

            With an RSP, you don’t pay income tax on the money, so if you stop working and pull the money out at less than $10k a year, you’ve not paid a cent of income tax on that money earned.

          • Brian L.

            You’re right, of course Dan. I’m just talking about after your RRSP’s deductions are max’d out.

        • Marc

          Thank you Dan. I have been searching the entire length and breadth of the internet for this topic and answer. I have spent the last three years maxing out my RRSPs during my boom years with an internet based company and now I am going to withdraw against by RRSPs this year in what I think to be a zero income year.

        • victoria

          Thank you so much for the information sharing on this topic! Most information I was able to find on the web focused on not withdrawing until 65 when ready for a traditional retirement and the withholding tax as a negative. I am also a young Canadian and “retire” every few years. I tend to travel during my off time and run my online business – but when I am back in Canada pick up consulting gigs.

          I have a significant amount of RRSP contribution room and wanted to deposit the max as I have the cash flow available, and otherwise would be paying significant tax in 2016.

          Any suggestions on shorter term investment options if I too am considering a 1-2 year time horizon after which I plan to again cut back and would like to draw on these funds during years of lower income levels?

    • Cory

      Hi Dan,

      I have had 2 clients do this now. One is a doctor who travels to Africa every couple of years and use his RRSPs to pay his bills in Canada while he is gone. The 2nd is an artist who lives in Florida for the winter and creates her artwork and then returns to Canada for a few months selling her art to fund her living expenses and replenish her RRSPs.
      We just convert funds into a RRIF to stream the income as they need.
      Obviously both non-traditional structures but they also were able to build significant non-registered savings to have for future “retirement” needs.

    • Paul


      Your idea definitely works BUT don’t forget if you had worked straight 6 years, you savings would have been more than 500k in your pocket but now you only have $213k. Waste of 3 years not earning anything just to save taxes?!?!?!?!

    • Katrina

      Yes absolutely! You have a brain!!! I call it completely legal tax dodge. So many Canadians don’t use their brain…I figured this out in high school during my grade 10 accounting:)

  6. Dan

    No worries Danielle

    I didn’t see anything on Facebook, must not have been me.

    You’ll find me at


  7. Margori

    Off topic. I am searching for an answer. I am looking to claim hardship and withdraw a portion of my RRSP. My income is tax free and wondering when applying does it mean my income will be considered 0?

  8. Brent

    I am a Canadian citizen living and playing taxes in the US. If I cash-in my RRSPs, do the banks still with-hold the 30% for the Canadian government? Seems like I would need to claim the full amount on my US tax return.

    Any information on this process would be appreciated.


  9. Ken Swanson

    I repeat Rose’s question (modified), as in 2011, I paid a $77 withholding tax on a $770.00 RRSP that was moved into my Credit Union chequing account. I expected that this would be refunded after submitting my 2011 return, and made a reference to the tax in a note. My net income was only $1550.00, and I owed no income tax, but the CRA ignored my question and made no reference to this withheld tax on my 2011 assessment.

    “If someone’s income is below the poverty line and they withdraw an RRSP (below $1000), should the withholding tax paid on the RRSP withdrawal be refunded with an income tax return?”
    and I also ask: Is there a special form or schedule to complete to apply for refunds of withholding taxes such as the type described in the previous question?

    • Robert Weaver

      The credit union is responsible for issuing a form to you, (between February and March 31 of the following year), noting the amount that was with held. There is a space on page four of your return to list the amount paid and you a submit the received form as proof of payment.

  10. Henry

    with my eldest son finishing his college and my next one going to university this coming year, I am feeling a bit broke financially speaking. I have a basically what they called locked RRSP thru my company group plan and standard life told me I cannot do anything, cannot withdraw any money because is under government legislation. I need to get some debt free and trying to visit my mom back home in Ecuador but can’t ’cause is very difficult and have not been back since 5 years ago. Is there anything I can do to get some of my money withdrawn to pay some stuff and get flight tickets?.. Really need help…thanks.. Henry

    • Omer

      Hi Henry,

      You can withdraw money from locked in RRSP. Most bank employees don’t know the procedure.. Here is the procedure from OSFI website to unlock the locked in RRSPs

      • Rob

        You can withdraw money from an individual RRSP anytime, subject to withholding taxes.

        Your can withdraw money from a Locked In Retirement Account (LIRA – usually the commuted value of defined benefit pension from previous employers) subject to certain regulations of the OSFI or roll 50% of it into an individual RRSP.

        You cannot withdraw money from a Group RSP until you leave the company. Usually, 50% of the funds come from employer contributions and they cannot be touched until you retire. The other 50% called be rolled over into an individual RRSP, with withdrawals subject to the usual withholding taxes.

  11. Nivedita

    I am a Canadian citizen and currently living with my husband and daughter in US. I am not working since last couple of years but used to when when I was in Canada. I have some RESP savings back in Canada. What will be my tax liability if I withdraw that money?

  12. Garth

    I am retired and withdrawing a max amount to maintain my oas from clawback. I am dealing with td financial with my RRIF.
    I can not find out if when I take a monthly withdrawal if they are remitting the tax withheld monthly or working on this capital until the new year. All the while the government is asking me to pay additional tax three times a year. I am not doing this as I would be paying twice. What are the regs regarding banks or trust co. around remitting tax withheld from a riff. Tks G.

  13. phil

    i will be retiring to the philippines in 2 yrs when i withdraw rrsp money from a rrif i pay 25% but canada has a tax treaty with philippines what do i need to do to get this reduced rate

  14. Jim

    I live in Quebec and withdrew $5000 from my RRSP – I was left with $3,927.30
    16% was held at source from QC & 5% Federally – so 21% was withheld
    The bank (TD) also charged a $25 + tax fee of 44.70.
    Had I withdrawn $10,000 the amount would of been 26%

    The 16% was totally unexpected and I found nothing that mentioned this online.
    I called Rev.QC and they confirmed they keep 16%.

    let’s just say I’m not too happy with the result.

  15. Ken Swanson

    I withdrew a $750 RRSP in b.c. about 10 years ago, and was charged 10% Withholding Tax by the Credit Union for Rev Can, but I was able to reclaim it from Rev Can a few years later, because I had a very low income in the year that I withdrew the money, so all of the tax that was charged was credited back to me.

    Sounds like you got a real raw deal!

  16. Tony

    I withdrew $10k from my RRSP as I had a very low income in year 2014. Can I claim back the withholding tax this year when I file my tax return as I am still on very low income?

  17. gladiola

    I took out 2500 in rrsps in January 2014. 250 was automatically paid to the govt.
    I am being sponsored by second career for school
    I only get for living expense 145 weekly
    Now I find in 2015 this year I owe 1400
    My income is so small. How do I owe 1,400?
    I would think I would owe nothing.
    Can anyone give me insight on this matter?

    • Don Kent

      Hi Tom:

      Must RRSP withholding taxes be paid with funds from within the RRSP? If so, why couldn’t the withholding taxes be paid with other “tax paid cash”. The problem with using RRSP funds is that the RRSP “room” is forever lost.

  18. melanie

    I recently quit my job where I had a RRSP/DPSP. I do need that money so I will be cashing it out. I know that there will be a 10% withholding tax on it. If I have them up that amount (if I can) to 20-25%, will I end up with a bigger refund on my tax return? or am I still going to owe a bunch of money come tax season? I am in a low income bracket between 25000-30000.

  19. Lisa

    I withdrew 40,000 in RRSPs this year. Come tax time next year, will I be taxed on the full 40,000 or the amount I received after I paid the withholding tax?

    • Gee

      the full 40K becomes income for the year – 30% withheld = $12K – if your taxes exceed $12k you’re on the hook for the difference ; if less than $12k you get a refund

  20. Casey

    I withdrew around $11500 from an RRSP under the HBP back in 2007. I’ve currently repaid about $7500 of that. The money was in GICs, which have now expired and it is sitting in cash, and I need to have it somewhere more productive. I am an Ontario teacher with a substantial pension and have been advised that having RRSPs may not be in my best interest. Part of my plan is to max out my TFSA account before considering other investment vehicles. I am currently on maternity leave for the entirety of 2015. Would it be in my best interest to withdraw the money this year while I am at a lower income (probably lower than I will be in retirement) and get it into my TFSA index funds? What happens with the approximately $4000 I still have yet to pay back? If I want to take the tax hit now at the lower income for that money, is there a way to do that? Thanks for any information.

  21. Jr

    We live in Quebec and my wife is now staying at home mom with no income. She has a chunk of RRSP that she contributed to a while ago that she is considering to take out in order to put on mortgages. Since we are planning on having our kids consecutively and she will stay home for the few years to come with no income, if she withdraws the maximum non-taxable amount allowed (11327$/year for 2015) I believe… Would it work out and she would actually cash in her RRSPs over the next few years without paying income taxes on them at all? (except the automatic withheld amounts that would be refunded to her after the income tax report for the year is filed of course…)
    NB We aren’t planning a retirement based on RRSPs, we are planning on mortgage and apartment investments for retirement which is why we are considering RRSP withdrawals.
    Thanks for your help!

    • Katrina

      Hi because you are claiming as married your taxes are a bit messier. If she was single, the answer would be yes. Actually most Canadians don’t know this but the second you have kids, you can claim them as spouse equivalent if you are single ( meaning now you can make 20 k or so depending on a province tax free). Just make sure your ex spouse agrees who is claiming which child as a spouse. Go to taxtips. Ca and do a pretend run of your taxes to play with the numbers to pay the least amount of taxes by manipulating the rrsp income for your wife . Or go to he block and get them to mess around until you find the perfect combo. Remember that you have to take out rrsps out by feb to make it count as income for the previous year.

  22. Bernie

    Is there any benefit to switching an RRSP over to a RRIF in retirement prior to reaching the mandatory age of 71? I’m not concerned with minimum withdrawal requirements as my wife is a lot younger than me. Are the withdrawal withholding taxes the same with RRSPs and RRIFs?

    • Gee

      yes especially if you do not have pension income (CPP, OAS, GIS do not count) because as of age 65 you can have $2K/year pension income tax free (it’s done as a credit) so set up the RRIF and draw out 2K /yr for each year you’re 65 or more tax free – small beer but better than nothing

      • Bernie

        Thanks Gee but I do have a company pension so I’m already getting the $2K benefit. I’m almost 66 and collecting CPP & OAS besides my pension. My wife’s still working full time so I haven’t drawn any RRSP yet but would like to starting in 2018. The question is should I switch over to a RRIF or continue with my RRSP until 71.

        • Gee

          Hi Bernie,
          I can only comment on what I’m doing which is to “melt” my RRSP using the lowest tax bracket as a guide(i.e draw enough to be at the top edge of the lowest tax bracket) until age 71. I have no pension so the RRIF as pension income will be employed at 65.
          It also depends on if you need the money and what tax bracket you fall into – maybe a trusted advisor (as the line goes) can help.

  23. Kewine

    How about if there are the two of us with all the funds in a single RRSP?? We are married and each over 70. We have a single RRSP set up with Can Trust. We have no other income to declare as we live off a savings account – giving us essentially no interest. So do each of us get to take an amount out and if our income is nothing – do we not get all that witholding back come April? PS- we know we need to put this in a RRIF next year….


    • David

      Two people cannot have one RRSP. It must be in the name of only one of you and only that person can make a withdrawal.

    • Katrina

      Yes ! You are on the right track! Go to a cheap accountant BEFORE January And get him to put in different numbers for your income . You will find a perfect income for both of you that will result in zero taxes being owed. Any withheld taxes will be released the second you do your taxes, as soon as you get all your tax slips and file your taxes electronically. You could have your refund back by February !

      • Katrina

        One other thing. If you have tons of money in there then you have to pay some taxes because I would recommend taking out the max amount at lowest tax bracket. Again, a tax advisor and or accountant are gonna be a great help to you

  24. John

    I have a company RRSP and if I invest $1000 they will match 50% of my investment (up to $500). So I wanted to know if it’s possible for me to invest $1000 and withdraw the $1500 right away and only have to pay income tax/withholding tax? My bank said there’s no fee’s or penalties and my company (and the bank) confirmed that the full amount invested (plus the company contribution) is available to me right away (not locked in). It just seems too good to be true.

    Note: I’d be using my Chrismas Bonus so I’d need a quick turn around to buy Chrismas gifts for my wife and kids (I live pay check to pay check, so a quick $500 would be nice)

  25. Bev Simpson

    I am 65 years old and currently living in New Zealand. I have RRSPs in Canada and wondering how best to access the funds. My income is very low.

  26. Georgia

    I had to withdraw 30,000 from RRSP this year (gross withdraw was $42,000 with the tax withheld – I got $30,000 in cash/CRA got $12,000). I needed this money to cover short term home construction costs (the downfall of a builders mortgage). I am planning to re-contribute back into my RRSP in the same tax year (I have the contribution room). So I understand I need to re-contribute the gross amount of $42,000 and then I should receive a refund approximately equaling the withholding tax. Is this accurate?

  27. Faith

    If we are over 65, only receive CPP and OAS.
    If we cash in 20,000$ rrsp would we get tax credit for amount taken off by bank

  28. Mischa

    Quick question – if the bank or RRSP issuer (in this case Sunlife) does not withold any tax at all on a total cash out of an RRSP, what recourse do people have when the CRA is demanding that tax from the RRSP be paid?

  29. Runeash

    In my case my wife stopped working but I imagine the RRSP withdrawal under 10k would still impact us in the sense that I cannot claim spousal amount plus CCTB would be less as it is calculated on family net income. We are hoping to use her RRSP withdrawal to pay off mortgage faster considering saving on mortgage interest amount vs the decrease in CCTB + lose in using spousal amount. Is there advantage to converting her RRSP to RRIF for withdrawing purposes (we are in our 40s)

  30. Russell

    I need some cash for a building project. What is the best way to withdraw RRSP’s without paying a whole bunch on witholding fees. I’m looking at about an $80,000 withdrawl.

  31. Garry

    I am 65 and will be retiring in the new year. I have been making my annual rrsp contributions in February – for the previous year
    Will I be able to make a contribution in Feb 2018 for the 2017 tax year and still withdraw money from my rrsp in 2018 with additional tax

  32. LORNA

    If a company has a number of gics in RRIF account and the compulsory % has to be cashed in, how is it decided which GIC to partially cash in. Hopefully it would be the GIC accumulating the lowest interest.. Thanks

  33. John

    I withdrew $5000 on Feb 1st to my checking account with BMO. The deposit showed as RRSP Redemption in the amount of $4500. I went to pay some bills on Friday and saw I was in an overdraft condition. For some reason on Feb 14 the bank withdrew another $499.94 calling it RRSP withholding tax 20% not 10%. I contacted the bank and was told that I can only withdraw up to $5000, not $5000 or I will get charged the 20%. I must be stupid or something paying $499.94 for 1 lousy cent!

  34. Renan

    I owe 19000 to Td line of Credit. currently interest alone costing me $185 a month. i am thingkin of taking money out from my rrsp to pay it off. what is your thought. thank you

  35. Greg Mathew

    Hi Tom,

    I presume this article applicable for Tax year 2018.
    I have slightly different question. Considering things going with me, I do not think I will earn any income this year. In past years, I have invested in RRSP and wish to withdraw to pay my debts. My income is nearly zero, can I get back withheld RRSP withdrawal taxes when I file for tax returns. Please note, I file tax returns with spouse and spouse income is much higher.


  36. Kris

    Hi Tom and community

    I want to make sure that I understand the concept correctly so thanks in advance for your help. For sake of simplifying the process assume I withdraw 100K from my RRSP on
    05-01-19. Based on the article there should be 30% withholding tax so the amount deposited into my bank should be 70K.

    I recognize that 100K in income be taxed once taxes are due 04-30-2019 (or earlier). My question is whether the witholding tax is simply a method for CRA to make sure that the liquidator is able to pay their obligation. Is the total tax paid (income and witholding) for the 100K reduced by amount of the 30K witholding, OR is the tax obligation is IN ADDITION to the witholding tax.

    Here’s the math to illustrate the question (assume 50% tax rate for simplicity).

    A) 100K withdrawn and 70K netted in bank account. 30K withheld. At tax time I pay 50% income tax on the 100K so I’m obligated to pay 50K in tax. Since the gov’t already has 30K at source I’m only obligated to pay an additional 20K. 100K – 50K = 50K

    B) 100K withdrawn and 70K netted in bank account. 30K withheld. Once tax time I pay 50% income tax on the 100K so I’m obligated to pay 50K in tax. Am I responsible for 50K AND the 30K witholding is in addition. So In the end withdrawing the 100K would mean I end up with only 100-50-30 = 20K.

    thanks again. – Kris

    • Rob

      Example A in my opinion is the way they would tax your withdrawl.

      • Larry

        I just asked a very similar question but was wondering if there is an option C which is:

        C) You pay 50% tax on the $70,000 you netted, which will end up being $100,000-30,000-35,000 = $35,000.

  37. Liz

    How do I avoid being double taxed in the situation where my employer pays money into my RRSP but I withdraw it out in the same year? I was on sick leave in 2018 but my employer kept paying my RRSP payments. I had to take the money out coz I didn’t have any other income. Now at tax time I realized that the income now appeared twice. 1) as a payment to me on a T4 and 2) as an RSP income on a T4RSP. When I input all the details in the tax software, it reported me having double the income I was paid. How do I report this to avoid being taxed on the same income twice?


  38. Larry

    Hi All

    Apologies id this was brought up previously, but it’s quite a long thread with lots of replies.

    My question is as follows: Does the withholding tax upon withdrawals gets accounted for when you do your tax returns?

    For example: If I withdraw $30,000 at a 30% withholding tax, I end up with $21,000. Now if I am at the 50% tax bracket (just as an example), do I end up paying the balance 20% on the original $30,000 or will I pay 50% of the $21,000?

    I appreciate your feedback here 🙂

  39. Dimos

    I am a Canadian , resident of Greece and I need to withdraw 25000 dollars from my locked in RRSP. In fact I am ready to travel fop for this, as I am in great need for the money , given the . I am married with two underaged children and the crisis has caused issues…financial one. I need to follow some therapy with my eye and possibly an operation. I have about 100,000 dollars in a locked in RRSP ,,,in GICs…25000 of which is cashable any time and I need to withdraw these money to address my immediate family needs
    Please provide me with your advise on how this can happen and what would be the tax rate.
    Do I need to visit Canada ( scotia Bank) and how long does it take to withdraw the funds..Is it a legthy process?

    Thank You in advance

  40. K Marshall

    Hi. I’ve been retired here in B.C. now going on my 4 th year , every year
    I have received 300.00 dollars back on my tax return, last year (2019 )
    I withdrew 2200.00 RRSP in form of T4RIF and payed 200. Holding tax
    So this year I’m figuring out my income tax. And it’s saying I owe 71 $

    Isn’t that to much ? If I did not claim the RRSP I would have received
    350.00. Refund this year. But when I clame the 2200. I owe 71
    Doesn’t that mean I payed over 600 $ tax on 2200 ? Please help

  41. Mark Skrebels

    I was a resident of Ontario for tax purposes from 1988 to 2001. In that time I contributed to an RRSP and a NREG. I have been a resident of the UK since 2001 and pay tax there. There is a tax treaty between Canada and the UK and looking at your article and others, it seems that I would need to pay 25% withholding tax in Canada if I take lump sums from either of those schemes. It also appears there is no way of reducing this tax, is that correct?

    By comparison, I receive a monthly pension from the company I worked for when I was a Canadian employee. The tax treaty means there is no withholding tax taken at source (in Canada) and I pay income tax in the UK which overall works out better as, on aggregate, I pay less than 25% on my pension income. Can the same arrangement be applied to my RRSP and NREG (whether I take regular or lump sum payments)? I believe the retirement age at which I can take RRSP withdrawals is 71. What is the tax treatment if I wait till then?

    Many thanks!

  42. Dmitry

    From article to article I see the same story about loss of compounded interest if you take the money from RRSP. What’s not said is that if you take the money from RRSP and place it in TFSA you will not necessarily lose and you may even gain, depending on your current and future tax bracket.
    Say you have some money to invest to RRSP or to TFSA. Say your current tax bracket is 30% and expected tax bracket at retirement is 15%. Then by all means, keep investing in RRSP, save 30% now, pay 15% later and gain. But what if your tax bracket now and at retirement are equal and are 20%? Then investing to RRSP is no different from investing to TFSA – the end result will be the same because Investment*RateOfReturn^NumberOfYears*(1-20%) is the same as Investment*(1-20%)*RateOfReturn^NumberOfYears.
    But what if this year you have no job and no income, but you have money in RRSP? Then it makes total sense to take some money from RRSP while still at 0% tax bracket and move them to TFSA from where you will take them later tax free. If you were to keep them in RRSP you would pay later 15% instead of 0%.

  43. Filomena

    Does the withholding tax upon withdrawals gets accounted for when you do your tax returns?
    For example: If I withdraw $30,000 at a 30% withholding tax, I end up with $21,000. Now if I am at the 50% tax bracket (just as an example), do I end up paying the balance 20% on the original $30,000 or will I pay 50% of the $21,000?

  44. Darcy chanakos

    I am 56 years old and have been on long-term disability that is non-taxable for almost 2 years. I am thinking of taking $13,808 out of my RRSP and moving it to my TFSA. I will have 20% with held for tax, but since I will have zero income and I am claiming under the allowable tax free earnings amount for 2021 would I get my 20% withheld tax back? I am married and my husband has an income.

  45. Robert

    I am considering retiring and changing my residency to Singapore and becoming a non-resident of Canada. If I cashed out my rrsp account in full, apprx $2.0 million what would be the most tax efficient way to structure it? and what would be the best case scenario for the lowest tax rate that I would need to pay to CRA?

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