Are You Dipping Into Your RRSP Due To Financial Woes?

While we have just passed another deadline to contribute to your RRSP’s there are many that have this form of savings but have found that they are ending up having to dip into it because their financial situation is so tight.

A recent survey has shown one that one in five people have had to dip into their RRSP money.  Yet by the same token many money advisors really advise against doing this.   There have been many reasons why this has become a reality and the reasons are most distressing.

Many have had to use these savings to cover their living expenses that they are no longer able to do with their regular income or they have had to use it to pay off debt that has been mounting up.   For others they had to take money out to cover an emergency that arose where they didn’t have extra money to cover this.

While there have been many that have taken money out of their RRSP there have been far less that are putting the money back in and many that say that it’s not likely that they will ever be able to.

What makes the situation even worse is that there is taxes that they are going to be hit with as a result of taking this money out as it becomes a form of income and the tax can be anywhere between 10% to 30% or more.   However, if the money is being taken out to make a purchase of a first home under the homebuyers plan or if they are trying to cover educational costs under the lifelong learning a plan then the situation is different.

Financial experts really do try to emphasize that taking money out of your RRSP should really only be done as a last resort.   The better approach is to try and set some money aside each month to help deal with unforeseen expenses that may arise or emergencies.   In addition to all of this there are indications that fewer people are going to contribute to their RRSP this year.   There is also a lot of confusion between the RRSPs and the TFSA. What many don’t realize is that the RRSP contributions that an individual will make are going to be a tax deductible whereas with the TFSA contributions that they are not.   Ideally what you may want to do is speak to your accountant who is going to be much more familiar with your finances from a professional point of view  and can assist and advise you as to what your options are and what might be the best for you.


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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant


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