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.
This is for example and educational purposes only, Questrade is unable to provide specific tax advice pertaining to your financial situation.
Please double check with a tax professional if you have doubts about the tax implications of an RRSP withdrawal.
Review the chart below to determine how the gross amount of your withdrawal will be taxed.
All dollar values are CAD, or CAD-equivalent, regardless of the currency of withdrawal.
