Should you withdraw funds from your Registered Retirement Savings Plan (RRSP) if you are having financial difficulties? It may be quite tempting to withdraw the necessary amount to reimburse your debts if you are drowning in them. But beware, you may bitterly regret it!
The RRSP was designed to help you save in income taxes during your working career and allows you to cash out during your retirement - when you will be less taxed, as you will no longer be receiving a salary. The RRSP is actually your retirement salary! By withdrawing it now, you are thereby doubling your income: your tax bill will be significant…
A retirement is built over a long period and should remain protected from the everyday storms you will go through during your working life.
An RRSP, as the name suggests, is for retirement!
Before dipping into the RRSP that you have spent years building, consult with your financial institution, your accountant or your financial planner to see all the options that are available to you. Addressing a short-term problem by using long-term assets is probably not the best solution…
In 2009, the federal government amended the Bankruptcy and Insolvency Act to protect RRSPs from being seized by creditors. Thus, a person who saw no other option than to place themselves under the protection of this law also thereby protected their RRSP. The reason invoked by the government at the time? So that all Canadians can be guaranteed access to a decent retirement. You too should keep that same concern in mind.
An RRSP is a precious retirement asset that is built over the long run. Think about this before mortgaging your future retirement income.
To find another way to get back on your feet, or for all questions or clarifications, do not hesitate to consult with us.
Financial difficulties? Pay attention to the warning signs!
There is no clearer sign that you are having financial difficulties than a call from a collection agency!