Since RRSPs are a tax-deferred account, you would not have previously paid tax on RRSPs contributions you made.
However, once you begin RRSPs withdrawals, you will be taxed on those withdrawals as income for the calendar year in which they were made.
What’s deducted from my withdrawal?
RRSP withdrawals are subject to a withholding tax: the amount of which varies depending on the amount being withdrawn (amounts may vary by province). The withholding tax will be paid directly to the CRA by OneVest’s custodian institution after you have initiated a withdrawal.
In addition to the withholding tax, you will incur admin charges for de-registration that are administered by our custodian institution, CI Investment Services:
- $25 for a partial cash withdrawal from an RRSP (includes withdrawals toward Lifelong Learning Plan or Home Buyer’s Plan), or
- $50 for a full withdrawal.
Please note that the above admin fees do not apply to RRSP withdrawals of less than $200.
When you make a full withdrawal from your RRSP, your pro-rated OneVest management fees will be charged to the time of withdrawal.
- Partial withdrawal
A client who resides in Alberta has $5,000 cash in their RRSP and requests to withdraw $1,000. The withholding tax on the amount would be $100 (10% on amounts up to $5,000). As such, the funds to be deregistered would be $900. The deregistration fees will be $25 with a sales tax of $1.25 (5% GST in AB). The client would thus receive $873.75
- Full withdrawal
A client who resides in Ontario has $10,000 in their RRSP and requests to withdraw the full amount at roughly the midpoint of the month. The withholding tax on the amount would be $2,000 (20% on amounts up to $15,000). The full deregistration fee of $50 would apply with a sales tax of $6 (13% HST in ON). The Management fees would be roughly $6.25 at 0.75% annually, the client would thus receive $7,937.25.
Additional RRSP withdrawal programs
There are two additional programs in which you are allowed to withdraw from your RRSP for specific purposes:
Home Buyers Plan (HBP)
The Home Buyers Plan (HBP) allows you to withdraw funds from your RRSP to buy or build a qualifying home.
With HBP withdrawals:
- You have 15 years to repay withdrawals made from your RRSPs under the HBP starting two (2) years after the withdrawal.
- You have to buy or build a home by October 1 of the year after you make withdrawals from your RRSP.
- Your RRSP issuer will not withhold tax for withdrawals of $35,000 or less.
In each tax year: re-pay one-fifteenth (1/15) of the total amount borrowed until your full amount owed is paid back to your RRSPs (via the Institution you withdrew from).
For more information, kindly refer to the CRA website for more information on eligibility, withdrawal and repayment conditions.
Lifelong Learning Plan (LLP)
The Lifelong Learning Plan (LLP) allows you to withdraw funds from your RRSP to finance full-time training or education for you, your spouse, or your common-law partner. The maximum annual withdrawal is $10,000, while the maximum lifetime withdrawal is $20,000. With LLP withdrawals, you have up to 10 years to repay withdrawals made from your RRSPs under the LLP.
Typically, you must repay 10% of the total you withdrew each year until you have repaid the full amount. You do not have to pay any interest on the money you withdrew. Payments are considered contributions; but, you will not be able to use the contribution to reduce your income for that year.
With the LLP: the student must have received a written offer to enroll by March of the year following withdrawals from your RRSP.
For more information, kindly visit the CRA website for participation and repayment requirements.
To make a withdrawal for the above reasons, please contact our support team by submitting a request, or by emailing us at: firstname.lastname@example.org.
This content is for informational purposes only. Nothing in this article constitutes legal, accounting or tax advice.