RRSP withdrawal ramifications | RRSPs and RRIFs | Discussion forum

You are doing good. If you withdraw $5,000 from each, the withholding is 10% for each. FI may charge a withdrawal fee. The amount you can withdraw is $5,000 plus withdrawal fee. Say withdrawal fee is $50 + HST = $56.50. Withdraw $5,056.50. Pay $56.50 withdrawal fee. Pay 10% on $5,000. If you withdraw one cent more the withholding tax is 20%. If you need more later in the year take out up to $10,000 plus withdrawal fee. Withholding tax 20%. I consolidated my RRSPs years ago into one RRSP, I cannot do this. You claim on your income tax return next spring. You may get some back depending on your tax situation. Reinvest the balance in what you want.

fabafter50 said
Hi Folks,
I could use some help understanding RRSP withdrawal.
I'm retired, not yet 65. I found this information:
Withdrawals are taxable. Any withdrawals from your RRSP are immediately subject to withholding tax. If you withdraw up to $5,000, the withholding tax rate is 10%; if you withdraw between $5,001 and $15,000, the withholding tax rate is 20%; and if you withdraw more than $15,000, the withholding tax rate rises to 30%.

What I need clarification on, aside from the withholding tax, is the amount withdrawn added to your income?
If you have more than one RRSP at different banks, is it the total you take out, not let's say $5000 from each one? I have two coming due from different banks, so wondered if I pay 10% on each $5000, or 20% cause the total will be 10,000?
If your RRSP GIC is 25,000, can you take $5000 out, and reinvest the rest, paying the 10% on the $5000 and putting the 20,000 back in an RRSP GIC?
Thanks in advance.  

You might be wise to leave your RRSP (that will later convert to RRIF - age 71) in to one or more FI's. Some FI's only withhold PER withdrawal.
ie:
FI"1" take out $5000 and 10% will be withheld
FI"2" take out $5000 and 10% will be withheld
FI"1" take out another $5000 and 10% may be withheld OR they may with hold enough to gather a 20% withhold over both withdrawals. Check to see how your FI does it.

If you move all your RRSP to one FI and take out $10,000 you will look at a 20% withhold.
BUT if you have funds in 2 FI's and need $10,000 take $5000 from each for a 10% hold back.

But as mentioned if you are charged a withdrawal fee you have to take that into account too.

Managing withdrawals at 10% can be to your benefit as long as it does not cause you some consternation at tax time.

Also look to see if moving RRSP to RRIF will benefit you for income splitting.

Even though 10% or 20% with hold may be more than what is needed for your income taxes at year end you will be entitled to a refund and if not enough is withheld you will be honoured to cough up more for the tax man. All RRSP and RRIF withdrawals are taxable as income. It all depends on your other incomes and taxes withheld from them as well.

I can tell you that Hubert allows you to manage your own withdrawals and do withholds per withdrawal. So withdrawals on different days of say....$5000, $4500 and $1800 would have only 10% hold backs.

The following applies only if you will not have a qualified pension at 65. At 65, if not having other RRSP intentions, yearly convert $2,000. from RRSP into RRIF and cash this $2,000. out from this RRIF for the benefit of getting some pension tax credit on your tax return. Same withholding tax rules apply.

julio said
The following applies only if you will not have a qualified pension at 65. At 65, if not having other RRSP intentions, yearly convert $2,000. from RRSP into RRIF and cash this $2,000. out from this RRIF for the benefit of getting some pension tax credit on your tax return. Same withholding tax rules apply.  

fabafter50 Is retired and therefore maybe collecting a pension and federal and provincial pension credits. And you are mentioning a great idea in moving RRSP to RRIF then withdraw. It should be all free to do and the added bonus is RRIF is considered pension income and becomes splittable with spouse for more tax savings.....it makes a difference! Also no fear about mandatory RRIF payments just leave $5 in the account after the withdrawal(s) and no one should bother you.

RRSP is tax deferred. Pay now. Pay later. One advantage of annual deposits you build a tidy amount of savings. Not sure I would have saved this much without a RRSP. I am getting close to forced RRIF withdrawals. The tax I will pay is less than when I was working.

Rick said
My concern is if I only take out 5K increments, I'll be hit with a tax bill at tax time. Owe too much and they'll start demanding quarterly payments. Rather take out closer to my tax rate at 20% withholding than 10.  

Withdraw at 10% and keep the other 10% in a sock. If you need it for tax time use it. If not invest or spent it.

Rick said
My concern is if I only take out 5K increments, I'll be hit with a tax bill at tax time. Owe too much and they'll start demanding quarterly payments. Rather take out closer to my tax rate at 20% withholding than 10.  

If you think it would be to your advantage, you can instruct your RSP FI to take off additional withholding tax. You can specify how much.

Rick said
Thanx for the tips. Still in "saving" mode...haven't started "spending" mode yet. Could be another few years.  

You can take money out of an RRSP ANYTIME. My first RRSP withdrawal was about 3 years contribution in 1981 when interest rates were in the 17%-19% range.