A Registered Retirement Savings Plan (RRSP) can be a powerful investment tool for your money. Canadians contributed over $36.8 billion to their RRSPs per year and that number continues to rise according to Statistics Canada.

Its popularity is based on the fact that the money you contribute to the plan is deducted from your income and remains nontaxable until it is withdrawn.

However, once you decide to withdraw the funds, in most circumstances, the money will be included as part of your annual income and will be subject to income tax.

Here are the details on how to withdraw your RRSP in Canada:

Withholding Tax

Taking money out of your RRSP account prior to retirement requires you to report it on your income tax when you file. The financial institution that administers your RRSP also withholds a certain percentage of the money you withdraw, depending on the amount.

The withholding tax works as follows:

  • Up to $5,00010 percent withheld; 21 percent in Québec
  • $5001 to $15,00020 percent withheld; 26 percent in Québec
  • $15,000 and up30 percent withheld; 31 percent in Québec

Early Withdrawal Taxes

If you make a pre-retirement RRSP withdrawal, you also may have to pay additional income tax at the end of the year. This depends on your tax bracket and if the withdrawal puts you into a higher tax arena.

However, the Canada Revenue Agency does provide an exception for pre-retirement withdrawals. If you use the money toward a Home Buyers’ Plan or Lifelong Learning Plan, no tax will be withheld and you do not need to report it on your tax return.

Registered Retirement Income Fund

By the end of the year in which you turn age 71, all RRSP contributions must cease. At this time, CRA requires that the RRSP be used as retirement income. The vehicle to accomplish this is a Registered Retirement Income Fund, which provides you with a steady flow of retirement income.

“At 71 you can go to your financial institution and transfer your money from your RRSP to a RRIF,” explains France Tisi, Bank Manager with the National Bank Financial Group.

“At that time, you decide what monthly payment you want from the RRIF. It can be as high or as low as you like, as long as it is at least the minimum set out by the government. You can also change the monthly amount anytime you wish.”

Tisi notes that minimum payments vary and are based on a calculation that uses your age. They are considered income and are subject to annual income tax.

If you choose, you can withdraw the entire amount in one lump sum. However, you may want to consider the effect this could have on your income tax bracket for the year.


Another option at your disposal is putting your RRSP into an annuity. An annuity allows you to opt for an income that spans the rest of your life or for as many years as you choose. The amount of your annuity depends on several factors including your payment period.

You can receive monthly, quarterly or annual amounts, or receive one lump settlement. Your RRSP isn’t taxed when it is moved to an annuity. However, payments are considered income and should be claimed on your yearly tax filing.

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