4 min read

can i close my rrsp account

Written By

Brandi Marcene

Having a retirement plan is essential. As you retire, you will need enough money for your life to look forward to. This planning can involve many things and would be a long-term solution for retirement plans for saving money for retirement in Canada, like a registered retirement income fund. You might have created a Registered Retirement Savings Plan (RRSP), which is a great and standard vehicle when planning for your retirement. Different things affect your plan, too, like how inflation affects retirement.

However, it's essential to be aware that taking money out of these plans can affect your pay tax, like income tax to taxable income and withholding tax. To maximize the benefits of your RRSP, it's a good idea to understand the potential expenses associated with making RRSP withdrawals or closing to get RRSP income. Contributing to an RRSP can help lower your taxes now and save for retirement in the future. Knowing how RRSP withdrawals function is crucial for using the account effectively over your lifetime and ensuring a secure retirement, but following RRSP withdrawal rules is essential as well. Also, there are rules in registered retirement income fund (RRIF)

But of course, just like every other important thing that is associated with finance, some policies and RRSP withdrawal rules need to be followed when focusing on withdrawing from your RRSP. The question everyone with RRSP asks is, can I close my RRSP account?

Can I close and Withdraw From My RRSP account?

If you wish to withdraw from your RRSP, you can transfer the funds online or contact your financial institution to request a withdrawal. However, it's important to note that there are certain considerations. If you withdraw from your RRSP before retirement, you will need to report it when filing your income tax and paying withholding tax.

Withdrawing money from your RRSP is a simple process. You can choose to invest the funds in various ways, such as cash, GICs, mutual funds, ETFs, individual stocks, bonds, and more. To access the money, you may need to convert your investments into cash by selling securities and then withdraw the cash into your bank account.

Plus, your financial institution will withhold a portion of the RRSP withdrawal money as a withholding tax. Moreover, if the withdrawal pushes you into a higher tax bracket, you may owe more income tax by the end of the year. Therefore, it's crucial to be cautious and continue reading for further details. You can't withdraw RRSP without paying taxes.

When Can You Withdraw Money From RRSP

The time when you can withdraw funds from your RRSP is when you have full control over your RRSP and can withdraw from it whenever you want. This includes taking out small amounts or the entire balance. You also have the option to buy an annuity or transfer your RRSP funds into an RRIF at any time, but you must do so by the end of the year you turn 71.

Just keep in mind that you will have to pay taxes on any RRSP withdrawals. The tax rates are 10% for withdrawals up to $5,000, 20% for withdrawals above $5,000 and up to $15,000, and 30% for withdrawals above $15,000.

Although your RRSP is primarily intended for retirement savings, there may be situations where it is reasonable to withdraw from it before retirement.

Withdraw Of RRSP And Contribution Room

RRSP withdrawals do not affect your RRSP deduction limit, which is also known as contribution room. Unlike TFSA withdrawals, withdrawing from your RRSP does not reopen the contribution room. It is important to remember that when you contributed, you saved tax from the deduction on your return. If you are unsure about whether you made the deduction, our Tax Experts can assist you with that.

Withdrawing Money From A Spousal RRSP

A spousal RRSP allows for income splitting, where one spouse can contribute to an RRSP in the other spouse's name. This can help lower household taxes when the funds are withdrawn by the lower-income spouse.

Note that you need to wait two full calendar years with no contributions before making a withdrawal to avoid tax implications.

Understanding Withdraw Taxes

When you take money out of your RRSP, you will have to pay taxes on the withdrawal, as it is a mandatory RRSP withdrawal to pay taxes. This amount will be added to your taxable income for the year, and the CRA will request its share of the money. Remember that your financial institution may also withhold some taxes when you withdraw from your RRSP before the age of 71. If you make an RRSP withdrawal before retiring or as an early RRSP withdrawal, it could potentially push you into a higher tax bracket, resulting in a larger tax bill for the year. However, this will depend on your income.

Withdraws Of RRSP Without Paying Tax

There are ways to avoid paying income tax or not paying withholding tax. The following are the ways you can avoid paying taxes for your retirement income as legal ways.

Buying Home

The Home Buyers’ Plan allows you to take out up to $35,000 without any tax or it being counted as income as long as you meet the CRA's criteria. Repayments start after two years, and you have fifteen years to pay back the amount to your RRSP. CRA will provide you with an annual statement showing your balance and minimum payment for the next year.

The Long Life Learning Plan

You can use the Lifelong Learning Plan to take money out of your RRSP for full-time education or training for yourself, your spouse, or your common-law partner. The withdrawal won't be taxed if you repay the amount to your RRSP within ten years, usually beginning five years after the initial withdrawal.


Having a retirement plan is important, and if you are a Canadian Citizen, you can use an RRSP account. This has helped a lot of people create their financial plans for the future by having their money safe for the future, like investing in stocks, buying properties, and so on. But when withdrawing from RRSP, it is important to know that you would have to pay taxes, and there are ways to understand that. However, there are ways you can avoid paying taxes.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!