Withdrawing from your RRSP is not as simple as taking money out of a savings account. The CRA applies withholding tax immediately, and withdrawals are added to your taxable income for the year. Understanding the rules before you withdraw can save you thousands of dollars in unnecessary taxes. This guide covers every scenario — early withdrawals, retirement withdrawals, the Home Buyers' Plan, the Lifelong Learning Plan, and what happens at age 71.
When you withdraw from your RRSP, your financial institution is required to withhold a portion for income tax and remit it to the CRA on your behalf. The withholding tax rates in Canada (outside Quebec) are:
Quebec residents face slightly different rates due to the provincial tax layer. The withholding tax is a prepayment of your eventual income tax. If your actual marginal tax rate is higher than the withholding rate, you will owe more at tax time. If your rate is lower, you will receive a refund.
Example: You withdraw $20,000 from your RRSP. Your bank withholds 30% ($6,000) and you receive $14,000. When you file your taxes, the $20,000 is added to your income. If your combined marginal rate is 43%, you owe $8,600 in tax on that withdrawal — meaning you owe an additional $2,600 beyond what was withheld.
This is the most overlooked and costly aspect of early RRSP withdrawals: when you withdraw from your RRSP, you permanently lose that contribution room. Unlike TFSAs, where withdrawals restore your contribution room the following year, RRSP withdrawals are permanent.
This means if you contributed $30,000 over many years and then withdraw $100 in a financial emergency, you cannot re-contribute that $100 later. You have permanently lost $100 in tax-sheltered space. This is a major reason why financial advisors strongly discourage early RRSP withdrawals.
If you have a year of very low income — perhaps between jobs, taking an unpaid leave, or in the early years of self-employment — you can strategically withdraw from your RRSP at a low tax rate. If your total income for the year is below the basic personal amount ($16,129 federally in 2025), you may pay little to no tax on the withdrawal.
Some retirees use a deliberate RRSP meltdown — gradually withdrawing RRSP funds in lower-income years before CPP and OAS begin, to reduce the size of the eventual RRIF and minimize future mandatory withdrawals and their tax impact. This must be done carefully to avoid OAS clawback territory.
First-time homebuyers can withdraw up to $35,000 from their RRSP under the Home Buyers' Plan without paying withholding tax at the time of withdrawal. The funds must be used for a qualifying home purchase. The amount must be repaid over 15 years (starting 2 years after the withdrawal). If the required annual repayment is not made, it is added to your taxable income.
Note that the HBP funds must have been in your RRSP for at least 90 days before withdrawal, otherwise they are not deductible. This prevents people from contributing to RRSP and immediately withdrawing under the HBP.
You can withdraw up to $100 per year (max $20,000 total) from your RRSP for full-time education or training. No withholding tax applies at the time of withdrawal. Repayments must begin no later than 10 years after the first withdrawal or the year following when you stop qualifying as a full-time student.
In retirement, RRSP withdrawals are added to your income and taxed at your marginal rate. The primary advantages of waiting until retirement to withdraw are:
You must convert your RRSP to a Registered Retirement Income Fund (RRIF) — or use the funds to purchase an annuity — by December 31 of the year you turn 71. You cannot simply leave money in an RRSP beyond age 71.
Once converted to a RRIF, you must take a minimum annual withdrawal. The minimum withdrawal percentages are set by the government and increase each year as you age. At age 71, the minimum is 5.28% of the prior year-end RRIF balance. By age 80, it rises to 6.82%. By age 90, it reaches 11.92%.
These forced withdrawals are taxable income. If your RRIF is large and you have other income sources (CPP, OAS, employer pension), the mandatory withdrawals can push you into a high tax bracket and even trigger OAS clawback.
Converting to a RRIF maintains full investment flexibility. You choose the investments (stocks, ETFs, bonds, GICs), and you can take out more than the minimum at any time. The main downside is longevity risk — if you live longer than expected or markets perform poorly, a RRIF could be depleted.
A life annuity converts your RRSP/RRIF balance into guaranteed monthly income for life, no matter how long you live. The downside is that you give up control of the capital and payments generally do not keep up with inflation. Annuities are most appealing for those who prioritize certainty over flexibility.
A term-certain annuity pays income for a fixed period (e.g., 20 years). It is less expensive than a life annuity but does not provide guaranteed lifetime income.
When you die, your RRSP is included in your estate income for the final tax year, unless you have named a qualifying beneficiary. If your spouse or common-law partner is named as a successor annuitant, the RRSP can transfer to their RRSP or RRIF without triggering immediate tax. A financially dependent child or grandchild can also receive the RRSP in a tax-deferred way. Without a qualifying beneficiary, the full RRSP value becomes taxable income in the year of death — potentially creating a very large final tax bill.
The golden rule for RRSP withdrawals is: defer as long as possible, then withdraw strategically. Avoid early RRSP withdrawals except for HBP or LLP purposes or truly low-income years. Let the tax-deferred growth compound. When you do start withdrawing, plan the sequence of income sources (RRIF, CPP, OAS, TFSA) to minimize lifetime taxes.
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