When is the best time to withdraw money from an RRSP in terms of cost?

Jamie Golombek, vice-president of taxation and estate planning at AIM Trimark Investments, has the answer.

Jamie Golombek 22 May, 2003 | 1:00PM
Dear Expert:

When is the best time to withdraw money from your RRSP so as not to cost you too much?

Expert Answer:

Since each dollar withdrawn out of an RRSP is fully included in your income, there is no ideal time to withdraw money from an RRSP other than to withdraw funds in a taxation year in which you otherwise have a lower taxable income.

In addition, it is wise to keep all RRSP withdrawals under $5,000 to keep the federal withholding tax that is applied by the financial institution to the bare minimum of 10%, applicable to withdrawals under $5,000. Note that the withholding tax rate rises to 20% for withdrawals between $5,000 and $15,000 and to 30% for withdrawals over $15,000. (In Quebec, the respective combined federal/provincial rates are 21%, 30% and 35% for the same thresholds.)

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Jamie Golombek

Jamie Golombek