Lesson Making a withdrawal

Withdrawing from an RRSP

Learn about the tax consequences of withdrawing from an RRSP.

RRSPs are primarily intended for long-term retirement investment, however if you find yourself needing to withdraw the funds you can absolutely do so. Because contributions to an RRSP are tax deferred, when you withdraw from an RRSP there are tax implications.

You are taxed a ‘withholding amount’ when withdrawing to help cover any income taxes owing as a result of the withdrawal.

The withholding amount may or may not completely cover any potential future taxes, this depends on your total overall income and other factors like deductions and etc.

For example: You have a yearly income of $45,000 and live in Ontario paying a base tax rate of approximately ~20% (Combined federal & provincial). If you withdraw $5,000 from your RRSP, the withholding taxes may not completely cover potential future income taxes. If you withdraw $16,000 however, you may be entitled to a tax refund, as the withholding amount is slightly higher than your base tax bracket.

Review the chart below to determine how the gross amount of your withdrawal will be taxed.

Withholding Tax Thresholds

Amount withdrawnTax withheldTax withheld (Quebec)
$0 - $5,00010%19% (5%¹ + 14%²)
$5,000.01 - $15,00020%24% (10%¹ + 14%²)
$15,000.01 +30%29% (15%¹ + 14%²)

RRSPs also allow specialized, tax-free withdrawals* through the Home Buyer’s Plan (HBP) or a Lifelong Learning Plan (LLP).

Please note: Withdrawals from an RRSP account will incur deregistration fees in addition to the withholding taxes.

  • Normal RRSP withdrawal - $50 for Partial, $100 for Full withdrawal
  • HBP/LLP withdrawal - $25 for Partial, $50 for Full withdrawal

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.

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