RRSP's, also known as Registered Retirement Savings Plans, are a great way to reduce taxes in your higher income tax years and allocate that income in the lower tax years.
Ideally people will contribute when they are in a higher tax bracket than when they decide to withdraw from their RRSP's.
When you withdraw funds from an RRSP, your financial institution withholds the tax. The rates depend on your residency and the amount you withdraw. For residents of Canada, the rates are:
- 10% (5% in Quebec) on amounts up to $5,000
- 20% (10% in Quebec) on amounts over $5,000 up to including $15,000
- 30% (15% in Quebec) on amounts over $15,000
*Figures were last updated 2021-08-19
For funds held in the province of Quebec, there will also be provincial tax withheld. For more information on Quebec withholding, contact your financial institution or Revenu Québec.
Please note that everyone's financial circumstances are different and decisions should be made based on your personal finances. This is not to be construed as financial, tax or legal advice and is for educational purposes only. You are advised to seek consult of a qualified professional prior to making any decisions.