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RRSPs (Registered Retirement Savings Plans) can be effective vehicles to save for retirement; but making withdrawals from these tax-advantaged plans may impact your tax bill. To make the most of your RRSP, learn more about the potential cost of withdrawing from an RRSP.
You pay a withholding tax: The withholding tax varies depending on the amount withdrawn and your province of residence.
You pay income tax: Your withdrawals must be reported on your tax return as income. If your current income is higher than your retirement income, you’ll pay more taxes now.
You lose out on tax-deferred compounding: Because RRSP contributions can compound over time, even a small withdrawal made today can have a big impact on your savings later.
You lose your contribution room: When you withdraw funds from an RRSP, you permanently lose the contribution room you originally used to make your contribution.
1 Subject to any restrictions on the investments held.