Study: One third of Canadians have withdrawn from their RRSPs before retirement
Posted Feb 26, 2016 09:53:38 AM.
This article is more than 5 years old.
BMO Financial Group released the new study that found one third of Canadians are withdrawing money from their RRSP before retirement.
Chris Buttigieg with BMO Wealth Management tells 570 News about the study.
“We commissioned this study to learn more about how Canadians are withdrawing from their RRSP’s before retirement, and what they were using the funds for. Essentially what we found, is that 34% of Canadians have withdrawn from their RRSP’s before retirement– and that the average amount being withdrawn was just under $16,000.”
Buttigieg said that through the study, they were able to examine the reasons behind Canadians’ decision to make these withdrawls.
“We found that a quarter of Canadians were making this withdrawl for use on a down-payment, like for a home. Using your retirement savings to purchase a home isn’t necessarily a bad thing, but you have to keep in mind that RRSP are there to provide for retirement later on in life. It’s important to keep that in mind so you can replenish the account.”
Some of the other reasons include to pay off debt, to pay for living expenses and to cover costs for an emergency.
“If you need funds than you want to make sure you consider all potential sources– not just an RRSP. Perhaps a tax-free savings account, or a line of credit and just make sure you have a good re-payment plan.”
He added that it’s always important to consult with a financial professional to see where it is most important to make a withdraw from, and put a strategy in place for a re-payment plan.
“Although it’s not advisable to make withdrawals from an RRSP, it’s clear that some Canadians have had to do so in order to meet short-term needs. There are tax consequences associated with making early withdrawals from your RRSPs, so it’s a good idea to speak with a financial professional to see if you have any other options before doing so.”
Buttigieg added that if you’re not looking to make a withdrawl, an important RRSP deadline is also coming up.
“I certainly suggest that if you are not looking to make an RRSP withdrawl, make an RRSP contribution. The deadline is Monday February 29th to make an RRSP contribution for the 2015 income tax year.”
The BMO RRSP Survey was conducted by Pollara between December 30, 2015, and January 4, 2016, with an online sample of 2,177 adult Canadians. Data have been weighted using the latest census data to be representative in terms of age, gender and region. The margin of error for a probability sample size of 1,500 is ± 2.5% and for a sample size of 2,177 is ± 2.1%, 19 times out of 20.
