Q&A: Early Registered Plan Withdrawals

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Is it a good idea to withdraw money early from an RRSP to avoid higher taxes later? Not necessarily, says Gordon Pape


QI am a long time subscriber to all of your newsletters and always value your advice. I am 63-years-old, semi-retired, and living mainly off the cash generated from dividends and distributions. Total cash generated is sourced about 50/50 from registered and non-registered accounts.

I am wondering if I should increase my withdrawals from the registered accounts and correspondingly, reduce withdrawals from non-registered accounts. The idea would be to deplete the registered accounts earlier so that down the road, my income will be increasingly tax advantaged. – Ron K., Calgary

 AYou would need a computer projection to see if that makes sense, plugging in assumed returns and tax rates. The problem with paying tax early is that you lose the growth that money would have generated if it had remained inside the registered plan. That’s why as a general rule I suggest people tap into their non- registered funds first, unless doing so would trigger big capital gains tax liabilities. But every situation is different so you may want to sit down with a financial planner and work through some scenarios. – G.P.


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