Advertisement
Resist the temptation to withdraw funds during periods of low income
I’ve read that one of the best times to withdraw from an RRSP is when you’re earning less money. I’m currently on maternity leave and would like to withdraw $5,000 from my RRSP to pay some bills. What do you think?
—Krystal Lee Young, Toronto
The very, very best time to withdraw from an RRSP is when you’re retired. Sure, you can withdraw funds during periods of low income but I’m not a fan of this approach. The first reason is that the government will withhold tax, meaning you won’t receive the full $5,000 you take out. Second, you’re taking the money from your future self. Not only will you need to scramble in the future to replace the money you withdrew, but you will also miss out on the power of compound interest in those few years. Third, you won’t ever get that RRSP contribution room back. And fi nally, even if the tax argument is compelling, you’re setting a precedent that your RRSP can be used for something other than retirement, which I think can be dangerous. All that said, if this really is your only option then take the money but leave the guilt. We parents have enough of that to deal with already.
Ask Bruce: Leave your question for Bruce Sellery »
More questions answered:
Should I buy life insurance for our child?
Should I use a RRIF to pay off a loan?
Should I have life insurance in retirement?
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
Think you're too young for life insurance? Buying early can help save on premiums.
Which ETFs should you invest in? Which ones best suit your risk tolerance? What about personal ethics? Check out...
If you’re looking for a financial advisor or planner, learning about their credentials can help you choose the right...
Nvidia doubles revenue in one year, Canadian inflation moves in the wrong direction, Target misses badly, Walmart beats earnings...
Here’s how to get your free ticket to attend the MoneyShow virtual expo.
Learn how to get mental health support in Canada, whether or not you have workplace benefits or insurance coverage.
Canadians with no children or siblings must consider estate planning alternatives. Here’s why trust companies can be a good...
The Trump effect and Trumponomics, Shopify’s huge earnings beat, it’s sunny days for Suncor shareholders and more.
Should you be paid as a power of attorney? Learn about the compensation rules in Ontario and how to...
