Let Canadians access their RRSP wealth for an immediate, cheap source of financial assistance

The federal government’s Home Buyers’ Plan (HBP), to support the purchase of a home, and Lifelong Learning Plan (LLP), to support enrolment in an educational program, already operate this way. Under the HBP, buyers can withdraw up to $35,000 tax-free, to be repaid over the next 15 years, while students may withdraw up to $10,000 under the LLP, to be repaid over 10 years.

If Ottawa allowed RRSP withdrawals along the same lines, this would offer two big advantages for Canadians.

First, they would get to use the full amount they withdrew from their RRSP, without the government withholding income taxes, which can be substantial. Of course, the annual mandatory recontributions to RRSPs that would follow would not give rise to RRSP deductions: plan holders already received that benefit when they made the original RRSP contribution. And if withdrawers didn’t recontribute, or recontributed insufficiently, then they would get dinged for taxes on the amounts they had withdrawn.

Second, and contrary to a normal taxable RRSP withdrawal, withdrawals under the HBP and LLP schemes do not lead to a loss of contribution room. So there would no implicit penalty for making use of temporary withdrawal.

Statistics: Posted by andrew4321 — Apr 11th, 2020 2:58 pm

* This article was originally published here