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When you make withdrawals from your Registered Retirement Savings Plan (RRSP) you will immediately pay withholding tax on the money you take out, meaning your financial institution will hold back the tax on the amount you withdraw and pay it to the government directly. You also must report that money as taxable income and you may have to pay even more at tax time depending on your overall tax situation. You’ll also permanently lose the contribution room you originally used to make the contribution. There are two ways you can borrow money tax-free from your RRSP as long as you pay it back—buying your first home under the Home Buyers’ Plan (HBP) or paying for full-time or part-time education under the Lifelong Learning Plan (LLP).

Visit GetSmarterAboutMoney.ca to learn about making withdrawals from your RRSP before and after you retire. Speak a registered financial representative or tax professional for advice.