Registered Retirement Savings Plans (RRSPs) are a useful account for Canadians to save for retirement. You are permitted to contribute to an RRSP until December 31 of the calendar year you or your spouse turns 71. However, there can be tax consequences if you withdraw the funds before retirement. Here’s what you need to know.
Things to know before withdrawing your RRSP
When you withdraw money from your RRSP, you must declare the full amount withdrawn as income in the year you withdraw, which will be taxed at your current tax rate. Depending on your income, this can result in a hefty tax bill.
Think carefully before withdrawing money from your RRSP to cover debts. Early withdrawals mean you lose the power of compounding. Long-term RRSP contributions earn money on both the contribution and any investment earnings, and it takes a long time to replace the funds. You must include the full amount of the RRSP withdrawal amount in your income at tax time. While some tax is withheld at the time of the withdrawal, it may not be enough to cover the full amount of income tax you owe. Try to withdraw the funds from a Tax-Free Savings Account (TFSA) or consult a financial professional and restructure your budget to put more toward debt repayment.
You don’t get your contribution room back. The Canada Revenue Agency (CRA) only lets you count that contribution once — you can't add back the amount of a withdrawal to your existing contribution room.
You can request a “gross” or “net” withdrawal. A $1,500 gross withdrawal will deduct $1,500 from the RRSP, and the amount you receive will have taxes and administrative fees deducted. If you choose “net” withdrawal, you will receive a cheque for $1,500, but the actual withdrawal amount will be higher to cover withholding tax and any administrative fees.
Remember: While you can choose to not name a beneficiary on an RRSP, if you do, it can be “revocable” (you can change it any time) or “irrevocable” (you cannot change it without the named beneficiary’s permission). If you named someone as an irrevocable beneficiary, you cannot withdraw the funds without that beneficiary’s permission. If the beneficiary is unable to provide consent — e.g., a child who is younger than the provincial age of majority or a person with cognitive or mental impairments — you will not be able to withdraw the funds or change the designation. If you made the designation irrevocable in error, talk with your financial institution or legal advisor.
Taxes on RRSP Withdrawals
There are two types of tax you will need to consider if you make an RRSP withdrawal: withholding tax and your marginal tax rate.
What is RRSP withholding tax?
RRSP withholding tax is a tax that's withheld when you make a withdrawal from your RRSP. The money withheld by your financial institution is passed to the CRA. The rate of RRSP tax varies depending on the amount you withdraw and the province you live in. This tax is also called RRSP withdrawal tax.
For British Columbia, Alberta, Saskatchewan, Ontario, New Brunswick, Nova Scotia, Nunavut, Newfoundland and Labrador, Prince Edward Island, Yukon, and Northwest Territories, the following tax rates apply:
Amount of withdrawal | Tax Rate |
|---|---|
| $0-$5,000 | 10% |
| $5,001-$15,000 | 20% |
| $15,000 + | 30% |
For Quebec, the following tax rates apply:
Amount of Withdrawal | Tax Rate |
|---|---|
| $0-$5,000 | 5% |
| $5,001-$15,000 | 10% |
| $15,000+ | 15% |
If you are a non-resident of Canada, you will pay 25% withholding tax regardless of the size of the withdrawal. The withholding tax is generally not enough to cover all taxes owing on the withdrawal, depending on your other sources of income.
What is marginal tax rate?
Your marginal tax rate is the combined federal and provincial taxes you pay on income at tax time. Your financial institution will provide a T4-RRSP showing the amount of the withdrawal and any tax withheld. You must declare this amount on your T1 General Income Tax Return in the calendar year you withdrew it.
Remember: RRSP withdrawal amounts are added to your gross earned income. Depending on the size of the withdrawal, it could push you into a higher tax bracket.
Federal tax rates
The following are the federal tax rates for 2025 according to the CRA:
2024 federal income tax brackets | 2024 federal income tax rates |
|---|---|
| $55,867 or less | 15% |
| $55,867.01 to $111,733 | 20.5% |
| $111,733.01 to $173,205 | 26% |
| $173,205.01 to $246,752 | 29% |
| More than $246,752 | 33% |
Provincial tax rates
In addition to federal tax, provincial tax must be taken into account. Provincial tax rates for 2025 can be found on the CRA website:
Province/Territory | Tax Rate |
|---|---|
| British Columbia | 5.06% on the first $47,937 of taxable income |
| 7.7% on taxable income over $47,937 up to $95,875 | |
| 10.5% on taxable income over $95,875 up to $110,076 | |
| 12.29% on taxable income over $110,076 up to $133,664 | |
| 14.7% on taxable income over $133,664 up to $181,232 | |
| 16.8% on taxable income over $181,232 up to $252,752 | |
| 20.5% on taxable income over $252,752 | |
| Alberta | 10% on the first $148,269 of taxable income |
| 12% on taxable income over $148,269 up to $177,922 | |
| 13% on taxable income over $177,922 up to $237,230 | |
| 14% on taxable income over $237,230 up to $355,845 | |
| 15% on taxable income over $355,845 | |
| Saskatchewan | 10.5% on the first $52,057 of taxable income |
| 12.5% on taxable income over $52,057 up to $148,734 | |
| 14.5% on taxable income over $148,734 | |
| Manitoba | 10.8% on the first $47,000 of taxable income |
| 12.75% on taxable income over $47,000 up to $100,000 | |
| 17.4% on taxable income over $100,000 | |
| Ontario | 5.05% on the first $51,446 of taxable income |
| 9.15% on taxable income over $51,446 up to $102,894 | |
| 11.16% on taxable income over $102,894 up to $150,000 | |
| 12.16% on taxable income over $150,000 up to $220,000 | |
| 13.16% on taxable income over $220,000 | |
| Québec | 14% on the first $51,780 or less of taxable income |
| 19% on taxable income more than $51,780 but not more than $103,545 | |
| 24% on taxable income more than $103,545 but not more than $126,000 | |
| 25.75% on taxable income more than $126,000 | |
| New Brunswick | 9.4% on the first $49,958 or less of taxable income |
| 14% on taxable income over $49,958 up to $99,916 | |
| 16% on taxable income over $99,916 up to $185,064 | |
| 19.5% on taxable income more than $185,064 | |
| Nova Scotia | 8.79% on taxable income that is $29,590 or less |
| 14.95% on taxable income over $29,590 up to $59,180 | |
| 16.67% on taxable income over $59,180 up to $93,000 | |
| 17.5% on taxable income over $93,000 up to $150,000 | |
| 21% on taxable income over $150,000 | |
| Prince Edward Island | 9.65% on the first $32,656 of taxable income |
| 13.63% on taxable income between $32,656 and $64,313 | |
| 16.65% on taxable income over $64,313 | |
| 18.00% on taxable income over 105,000 up to $140,000 | |
| 18.75% on taxable income over $140,000 | |
| Newfoundland and Labrador | 8.7% on the first $43,198 or less of taxable income |
| 14.5% on taxable income over $43,198 up to $86,395 | |
| 15.8% on taxable income over $86,395 up to $154,244 | |
| 17.8% on taxable income over $154,244 up to $215,943 | |
| 19.8% on taxable income over $215,943 up to $275,870 | |
| 20.8% on taxable income over $275,870 up to $551,739 | |
| 21.3% on taxable income over $551,739 up to $1,103,478 | |
| 21.8% on taxable income over $1,103,478 | |
| Nunavut | 4% on the first $53,268 or less of taxable income |
| 7% on taxable income over $53,268 up to $106,537 | |
| 9% on taxable income over $106,537 up to $173,205 | |
| 11.5% on taxable income over $173,205 | |
| Yukon | 6.4% on the first $55,867 or less of taxable income |
| 9% on taxable income over $55,867 up to $111,733 | |
| 10.9% on taxable income over $111,733 up to $173,205 | |
| 12.8% on taxable income over $173,205 up to $500,000 | |
| 15% on taxable income over $500,000 | |
| Northwest Territories | 5.9% on the first $50,597 or less of taxable income |
| 8.6% on taxable income over $50,597 up to $101,198 | |
| 12.2% on taxable income over $101,198 up to $164,525 | |
| 14.05% on taxable income over $164,525 |
Withdrawing RRSP at retirement
At the end of the calendar year in which you or your spouse turn 71, the RRSP must be collapsed. At this point, you can:
Take the full amount as a lump sum withdrawal, subject to withholding tax. The full amount must be added to your income and would be subject to your combined marginal tax rate. That could result in a very large tax bill.
Convert the RRSP to a Registered Retirement Income Fund (RRIF) and start drawing payments from it. The CRA sets a minimum amount that must be withdrawn. It is based on age and is a percentage of the market value of the RRIF.
RRSP withdrawal rules
We mentioned this rule before, but it's worth repeating. Withdrawal from an RRSP must be included as income and is subject to income tax at your combined marginal tax rate. Funds withdrawn under the Home Buyers’ Plan or the Lifelong Learning Plan are not considered income and do not have withholding tax deducted, but must be paid back over a set period of time.
You can transfer funds from an RRSP in one financial institution to another as long as the funds remain in an RRSP. If your financial institution charges transfer fees, it might be time to switch to an investment provider with no transfer fees. Transfers to or from a spouse due to a relationship breakdown, or the death of a spouse, are not considered withdrawals and are not subject to income tax as long as they are transferred directly from one RRSP to another. Ask your financial institution for assistance.
Home Buyers’ Plan (HBP)
If you meet the eligibility criteria, the CRA allows you to withdraw up to $60,000 tax-free to put toward the down payment of the purchase of your first home. You have 15 years to pay the funds back, and repayments start the second year after you withdraw the funds. The CRA will send you a statement each year with your HBP balance owing, payments made to date, and the minimum payment amount.
Lifelong Learning Plan (LLP)
If you meet the eligibility criteria, the CRA allows you to withdraw up to $10,000 tax-free per calendar year, subject to a maximum combined total of $20,000 tax-free to finance full-time education or training for you or your spouse. You cannot withdraw funds to pay for your children’s education under this plan.
You can spread the eligible withdrawals over four years. The accumulated total cannot exceed $20,000. You have ten years to pay back the LLP loan, starting in the fifth year after your first withdrawal. The CRA will send you an LLP notice each year with your balance, payments made, and the amount of your next payment. You must file income tax each year and designate your LLP repayment on Schedule 7.
RRSP withdrawals at age 55+
You can convert your RRSP to an RRIF starting at age 55 and begin receiving payments. Once you convert the RRSP to a RRIF, you cannot change your mind later and turn it back into an RRSP. The biggest danger with early conversion to a RRIF is you could run out of funds before you pass away. Always talk to a financial professional to ensure you understand all your options.
RRSP withholding tax on multiple withdrawals
If you withdraw multiple smaller amounts in a short period of time to avoid the higher withholding tax, your financial institution could still deduct the amount of withholding tax that would apply on the total amount. For example, if you want to withdraw $8,000, but you split it into four monthly withdrawals of $2,000 to avoid the 20% tax withholding, your financial institution could still withhold 20% on the last withdrawal if they notice the pattern.
Locked-in RRSP withdrawal
If you transfer pension funds to an RRSP, the funds may need to be “locked-in” until retirement. The funds follow pension locking-in rules, which vary by province. You cannot withdraw funds from a locked-in RRSP until the specified retirement age.
You can unlock funds in special circumstances such as financial hardship (not all provinces allow this) or shortened life expectancy, or you can request small balances to be unlocked at age 55. See a financial advisor for more information.
