Try Not to Withdraw Money from Your RRSP

Q: I’m not working and my employment insurance just ran out. Can I withdraw money from my RRSP until I get back to work?

A: You can access money in your RRSP as long as the funds are not “locked in” (although in some provinces you can unlock RRSPs for certain financial hardship reasons). There are strict rules about accessing locked-in funds. Your banker or financial adviser can provide you with more information.

When you withdraw money from an RRSP, it’s counted as income during the year you withdraw the money. To make sure you don’t end up owing income tax on the money you withdraw, a portion is withheld up front (10% if the amount is $5,000 or less, 20% for amounts of $5,001 to $15,000, and 30% of amounts over $15,000). You may get this back when you file your income taxes for that year.

However, it’s easier to spend than to save, so consider the impact of all of your options before you tap into your retirement savings and withdraw RRSP money.

• Do you qualify for any additional government assistance (retraining, extended EI benefits)?
• What expenses can you reduce or put on hold (for example, utility bundles or subscriptions)?
• Do you have any assets you could sell?
• Could you move elsewhere for work, even temporarily?
• Is your home or property big enough to generate some rental income?
• Are you able to work from home to make ends meet for a little while longer (such as tutoring English online or providing some child care)?
• How can you best manage existing debt obligations?

Some of these options may be easier to do than others, so rely on family and community support as you consider your next steps. If you have debt, communicate with your creditors to work out alternate arrangements during this difficult time rather then drawing down your retirement savings by withdrawing money from you RRSP.