MONEY TALKS

Early RRSP Withdrawals— Think Twice First and foremost, you’ll get taxed—twice. Depending on how much you withdraw from your RRSP, up to percent will be held back. Then, come tax time, you’ll have to add the amount withdrawn to your total taxable income, which might put you It sounds tempting, but you should never, into a higher bracket requiring you to pay more income tax. ever borrow from your RRSPs before You’ll also lose out on interest. Retirement savings currently retirement. Here’s why. yield about ve to eight percent interest annually, which adds up It could be the di erence that enables you to enjoy the retire-

TEXT STACY YANCHUK OLEKSY ment lifestyle you want. Additionally, if you’ve maxed out your contributions, you won’t be able to put the money back into your RRSP when you’re We deposit funds into our registered retirement savings feeling nancially stronger. That means your RRSP ceiling will plans (RRSPs) to ensure security and comfort when we stop working. be that much lower when you retire.

But sometimes, we’re tempted to withdraw some of it early. Whether In short, you should never withdraw from your RRSPs early, but it’s for a personal indulgence (part of a down payment on a vacation if you’ve already done so and are wondering what your next step property, a new car) or an unforeseen nancial crisis (bad invest- is, speak with your nancial planner about maximizing current ments, a lost job), the money seems like it’s just a phone call away investments as well as future contributions. You may also wish to to deal with whatever’s at hand. It all appears so enticingly simple. speak with a nonpro t credit counsellor about creating an overall

But there are some pretty severe consequences to withdrawing spending plan in order to put additional funds toward retirement. from RRSPs before you retire (for anything other than education or All in all, you should save as much as possible to enjoy the golden a rst home, which is not penalized). Here’s what you should know. years you always envisioned. Your future self will thank you.

HOW TO MAKE RRSP CONTRIBUTIONS EASY-PEASY AND PROSPEROUS 1 2 3

INSTEAD OF PANICKING EVERY FEBRUARY ABOUT COMING UP WITH A LUMP SUM TO DEPOSIT (OR HAVING TO BORROW MONEY) BEFORE THE RRSP DONATION DEADLINE, arrange to have funds automatically withdrawn from your paycheque or your bank account each month. You’ll take advantage of dollar cost averaging (spreading the cost over time instead of buying a product at a xed point in time, which could be more expensive). Plus, max out an employer matching program. (It’s free money!) DEPOSIT ANY RAISE OR BONUS YOU RECEIVE STRAIGHT INTO YOUR RRSP. Your expenditures don’t need to increase with every raise.

TAKE CONTROL OF YOUR RETIREMENT BY TAKING CONTROL OF YOUR MONEY. If you don’t know a lot about retirement planning or you’re uncomfortable talking about it, educate yourself: Read books and blogs, listen to podcasts and talk to a certi ed nancial planner.

STACY YANCHUK OLEKSY IS DIRECTOR OF EDUCATION AND COMMUNITY AWARENESS AT THE CREDIT COUNSELLING SOCIETY. FOR MORE INFO, VISIT MYMONEYCOACH.CA.

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