Does it ever make sense to make an early RRSP withdrawal?

Other than the HBP and LLP, specific scenarios could make sense to make an early RRSP withdrawal. One situation could be where taking some of the tax hit now would be more beneficial than postponing it. For example, if you are nearing retirement and have a large RRSP that will get converted to an RRIF at 71, you may want to lower your RRSP balance. This way, you could have less “income” when your RRIF starts forcing withdrawals. This situation calls for some tax planning to see if tax savings from the lower RRIF payments outweigh the taxes owed when reducing your RRSP balance.

Can I withdraw from my RRSP without paying tax?

On the other side of things, where you might have very little income, there is a case where you could pay no tax at all on your withdrawal. Suppose your total income, including the money you withdraw, is less than the Basic Personal Amount for both the federal level and the province in which you reside. In that case, you’ll pay no tax on your RRSP withdrawal.

Accounts

Discover the best investment accounts for your financial goals with PiggyBank’s comprehensive resources. Our guides offer detailed comparisons and expert advice on various account types, including RRSPs, TFSAs, and taxable accounts. Learn about the benefits, drawbacks, and features of each account to make informed decisions that align with your investment strategy. PiggyBank is here to help you optimize your investments and achieve financial success.

RRSP Withdrawal Rules and Taxes Explained

RRSP 5 min

Accounts

RRSP Withdrawal Rules and Taxes Explained

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