Skip to main content

The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

Your web browser is out-of-date. For the best experience, please update to a modern browser like Chrome, Edge, Safari or Mozilla Firefox.

Freedom 55 Financial is a division of The Canada Life Assurance Company and the information you requested can be found here.

Early withdrawals from your RRSP

Key takeaways

  • You may be able to to take money out of your group RRSP, but there are costs if you do, including paying tax
  • You may be able to withdraw money for your education or to buy your first home without paying tax

What is a group RRSP?

A registered retirement savings plan (RRSP) is a savings account registered with the Canada Revenue Agency (CRA). It offers tax advantages not available in non-registered accounts.

Group RRSPs are individual RRSPs available through your employer as part of your compensation package and to enhance   your future retirement savings. 

Group RRSPs give you tax relief when your contributions are made through payroll deduction. This reduces your taxable income and reduces the tax each pay period. Investments within group RRSPs also grow tax-deferred until they’re withdrawn.

Why you might consider an RRSP early withdrawal

There may be several reasons why you’d consider taking money out of your group RRSP, perhaps you’ve been laid off at work or you need to cover some unforeseen expenses. However, in most cases, making an early withdrawal from your RRSP  might not be the best financial move. It’s best to consult with your advisor before doing so.

Note that early withdrawals may not be allowed from your group RRSP and you should refer to your member booklet for details. If you’re a Canada Life plan member, you can get personalized support from a health and wealth consultant.

The costs of withdrawing money early from your group RRSP

There are 3 significant ways early withdrawals can impact your retirement savings.

Lost contribution room

You’re  allowed to put 18% of earned income, up to a set maximum each year, into your RRSP. When you withdraw money you lose the contribution room, reducing the potential value of your RRSP at retirement. 

Lost compound interest

When you withdraw RRSP money, you can lose out on some of the positive effect of compounding on your investment returns. This can really impact your savings in the long term.

You’ll pay tax

Any amount you withdraw will be fully taxed as income in the year you take it out. 

You’ll also have tax withheld on the amount you withdraw. How much you’ll pay depends on where you live and the amount you take out. 

RRSP withholding tax rates

  • Amount withdrawn within a tax year: Up to $5,000
    • Withholding tax rate (except Quebec): 10%
    • Withholding tax rate in Quebec (plus an additional 16% provincial tax): 5%
  • Amount withdrawn within a tax year: $5,000.01 to $15,000
    • Withholding tax rate (except Quebec): 20%
    • Withholding tax rate in Quebec (plus an additional 16% provincial tax): 10%
  • Amount withdrawn within a tax year: Over $15,000
    • Withholding tax rate (except Quebec): 30%
    • Withholding tax rate in Quebec (plus an additional 16% provincial tax): 15%

There are special rules regarding withdrawing money from a spousal RRSP.

Withdrawing money early from your group RRSP without paying taxes

If you’re buying your first home or paying for your education, you may be able to take funds from your group RRSP without paying withholding tax or immediately including the funds in your income. 

Home Buyers’ Plan (HBP)

If you meet the CRA’s eligibility rules, you can withdraw up to $35,000 to pay for your first home. 

You must re-contribute the money to your group RRSP starting 2 years after you withdraw it, and you have 15 years to pay it all back. If the annual amount is not re-contributed, the amount will be included in your income for that particular year. CRA will send you an annual statement with your balance, payments made and the minimum payments for the next year. 

Lifelong Learning Plan (LLP)

To help pay for full-time education or training for you or your spouse or common-law partner, you may withdraw up to $10,000 per year to a lifetime maximum of $20,000, if you meet the criteria. 

You have 5 years to begin re-contributing the money back to your group RRSP, and 10 years to pay it all back. Again, If the annual amount is not re-contributed, the amount will be included in your income for that particular year. CRA will send you an annual statement with your balance, payments made and the minimum payments for the next year.

What's next?

Now that you know more about withdrawing money from your group RRSP, why not:

  • Determine other sources of retirement income and what your total income might be in retirement.
  • Consider which strategy for withdrawing money from your group RRSP best meets your needs.
  • Talk to your advisor to discuss how early withdrawals may impact your financial plan.
  • If you’re a Canada Life plan member, connect with a health and wealth consultant for personalized support.

The information provided is based on current laws, regulations, and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax, or other professional advisors.