For most Canadians, an RRSP (or Registered Retirement Savings Plan) is a wise part of any retirement savings strategy. Any money deposited to this special type of savings account can be used to buy securities (stocks, bonds, mutual funds, GIC’s and more) and grow without being subject to income tax until the funds are withdrawn. This would typically begin at retirement when one’s income is substantially lower and would therefore have a lower income tax rate. The idea is that until retirement the money inside the plan would grow much faster when one doesn’t have to worry about taking any tax off the top from year to year.
But what happens if someone wants to use that money before they retire?
Ideally, investors should be very cautious if they are considering removing any funds from their plan before retirement. However, sometimes investors may encounter unforeseen situations such as unemployment, disability, or other emergencies that will require an infusion of cash. If that is the case, then taking funds out of the plan may be necessary.
RRSP Withdrawals are Subject to Withholding Tax
The first thing that every investor should know is that RRSP withdrawals are subject to a withholding tax. …