Taking money from rrsp

[Boosted131]

Has anyone taken money out of their rrsp for financial reasons then paid it back after? I still haven't found work and am going to be needing some of its money soon, rather than sell off my vehicles...

[sputnik]

Better off selling your vehicles.

You will take a ~40% hit right off the top taking out your RRSPs

[Disoblige]

More info:

http://www.getsmarteraboutmoney.ca/en/managing-your-money/investing/rrsps-for-retirement/Pages/Making-RRSP-withdrawals-before-you-retire.aspx#.VrJoaFLtpfs

[spike98]

Originally posted by sputnik
Better off selling your vehicles.

You will take a ~40% hit right off the top taking out your RRSPs


Nope, wrong.

$0-$5k = 10%
$5k-$15K = 20%
$15+ = 30%

As a "fee" if you will that is taken on withdrawl. Then full amount (pre-fee) is added as income and the "fee" is credited as tax paid. The leftover is paid at your tax rate.

The "off the top" is to make sure people don't get hit with massive tax bills at the end of the year. You never pay more than your tax rate based on your income.

[sputnik]

Originally posted by spike98
Nope, wrong.

$0-$5k = 10%
$5k-$15K = 20%
$15+ = 30%

As a "fee" if you will that is taken on withdrawl. Then full amount (pre-fee) is added as income and the "fee" is credited as tax paid. The leftover is paid at your tax rate.

The "off the top" is to make sure people don't get hit with massive tax bills at the end of the year. You never pay more than your tax rate based on your income.

I shouldn't have said "off the top".

The amount left over is still taxed as taxable income. So if he gets a job in a few months he may get hit hard at the next tax season.

[civic_stylez]

TFSA's are better if you are looking for a tool that allows you to withdraw and repay without penalty while saving and accruing interest.

[sputnik]

Originally posted by civic_stylez
TFSA's are better if you are looking for a tool that allows you to withdraw and repay without penalty while saving and accruing interest.

Obviously. However that is not what this thread is about.

[realazy]

I believe the biggest downside ignored on all the the above posts (unless you clicked the link and read it) is that you LOSE the RRSP room after you withdraw. You DO NOT get to put it back.

[GotRice?]

dont mean to hijack but if you're on EI and you withdraw from this does it count as "other money"?

[dezmarez]

Witholding taxes are applied on the withdrawal, as mentioned above. (similar to your employer paying taxes directly to CRA on your pay cheque)
This usually shouldn't matter as it gets added onto your overall income the year you took the funds out.
You could end up owing more taxes on the amount, or getting a refund depending on the situation.

Once you withdraw the funds, the money is deregistered for good. You do not get this contribution room back.

Really, all depends on your financial situation. If you have been laid off, and are now in a new tax year, and don't expect to have any income throughout the year, it isn't the worst place to access funds....

[Boosted131]

I'm not on ei , mine ran out after 9 months

[theken]

Is there no short term work available?

[ExtraSlow]

Originally posted by Boosted131
I still haven't found work and am going to be needing some of its money soon, rather than sell off my vehicles... you should look at selling something, it hurts, but is smarter.

[Boosted131]

Originally posted by theken
Is there no short term work available? I've been looking. I get interviews , but so do another 50 people.

[redblack]

Fast food is always hiring

[spike98]

Originally posted by redblack
Fast food is always hiring

No, they actually aren't.

This is the typical response from the crowed of kids that are pissed that all of these people were making a ton of money and that there art degree will never get them there.

The issue a lot of skilled workers are facing has to do with over qualification. The managers/owners of these unskilled positions are either in the above mindset (fuck the oilpatch) or know better to hire someone that will leave the second the industry picks up.

OP, if you are looking for cash, you are best to start applying your skills under the table doing odd jobs. Then sell the liabilities. Then sell the assets. THEN dip into the retirement.

[Boosted131]

Everywhere I try and apply or go in for an interview looks at my resume and see's its all I.T related for the last 3 positions/5 years. So it seems like retail, food, etc wont hire me because of this.

[mzdspd]

Originally posted by Boosted131
Everywhere I try and apply or go in for an interview looks at my resume and see's its all I.T related for the last 3 positions/5 years. So it seems like retail, food, etc wont hire me because of this.

I am not sure how you are applying for these jobs but try and go into the business and talk with HR or a Manager. That always helps. Also, make your resume specific to the job (with any relevant experience).

Hope you can find something. Hopefully this Gov stimulus money will help.

[OTown]

Only time you wont be penalized (or taxed) for taking money out of an RRSP are:

- First time home buyer program (which must go towards your new home and which you have to repay after a certain time)
- Lifelong Learning Plan (for furthering education)
- Reach the age threshold for withdrawal of funds (or conversion to RRIF)

[schmooot]

You know what isn't cool though? When somebody dies their rrsp goes to the beneficiary in full. Nothing taken off the top. Now the estate (or executor which is me in this case) is on the hook for the full brunt of the taxes on said rrsp and have to figure out how to liquidate more than the estate is worth to pay them. Sorry but that part of the system is hugely flawed. The investment firm should not be paying out the entire rrsp without holding back taxes. For this reason I will never invest money in an rrsp. Filthy government. /rant

[Xtrema]

Originally posted by ExtraSlow
you should look at selling something, it hurts, but is smarter.

Also in the sell your shit camp.

RRSP withdrawal for me is one step above being homeless or if I'm 50+ and done with work. Other than that, it's not coming out.

While RRSP is your money, it's slightly above payday loan if you have to pay 20% in taxes to access it.

Again, need and wants. All you need is a place to stay, 3 meals a day and may be some form of transportation so you can get to work. Everything else in life are extras.

[16hypen3sp]

So, hypothetical situation here... I want to pull $10k out of my RRSP for whatever reason.

How much of that $10k goes to the government?

[03ozwhip]

Originally posted by Xtrema


Also in the sell your shit camp.

RRSP withdrawal for me is one step above being homeless or if I'm 50+ and done with work. Other than that, it's not coming out.

While RRSP is your money, it's slightly above payday loan if you have to pay 20% in taxes to access it.

Again, need and wants. All you need is a place to stay, 3 meals a day and may be some form of transportation so you can get to work. Everything else in life are extras.

The problem is that no one thinks about this until they're in dire straits. I've been there, I've been broke and who knows, it may happen again.

But the first thing i would be doing is selling my shit before dipping into rsp. It would be sad, but it's necessary to do so sometime, my family necessities come before any car or watch that I buy.

[relyt92]

Originally posted by 16hypen3sp
So, hypothetical situation here... I want to pull $10k out of my RRSP for whatever reason.

How much of that $10k goes to the government? There would be a 20% withholding tax, so you'd see 8k and then there may or may not be an adjustment because of it come tax time.

[ExtraSlow]

Originally posted by 16hypen3sp
So, hypothetical situation here... I want to pull $10k out of my RRSP for whatever reason.

How much of that $10k goes to the government? it is taxed at your marginal tax rate for the year in which the withdrawal occurred.

[RealJimmyJames]

Originally posted by Boosted131
Has anyone taken money out of their rrsp for financial reasons then paid it back after? I still haven't found work and am going to be needing some of its money soon, rather than sell off my vehicles...
Vehicles listed in signature:
1999 gmc sierra z71, 5.3L 4x4
2010 suzuki rmx450
2004 cbr600f4i
2009 Yamaha Grizzly 700 FI EPS (27's, clutched, warn winch, chipped)
Dude, sell something, or several somethings before you even think about cashing in RRSP. I'm not an expert on bikes or quads, but you should be able to get ten or fifteen grand out of that fleet pretty easily.

[Xtrema]

Originally posted by 16hypen3sp
So, hypothetical situation here... I want to pull $10k out of my RRSP for whatever reason.

How much of that $10k goes to the government?

http://www.investopedia.com/university/rrsp/rrsp7.asp

You may get some back at tax return time or you may not. It really sucks to pull RRSP out while you have other form of incomes.

[mode13]

Originally posted by OTown
Only time you wont be penalized (or taxed) for taking money out of an RRSP are:

- First time home buyer program (which must go towards your new home and which you have to repay after a certain time)
- Lifelong Learning Plan (for furthering education)
- Reach the age threshold for withdrawal of funds (or conversion to RRIF)

- have an investment loan, and withdraw from your rrsp the interest charged. The interest from the loan will cancel out your income gain from withdrawing the rrsp. Invest the loan.

[Manhattan]

Originally posted by mode13


- have an investment loan, and withdraw from your rrsp the interest charged. The interest from the loan will cancel out your income gain from withdrawing the rrsp. Invest the loan.

Horrible and confusing advice.

[mode13]

Originally posted by Manhattan


Horrible and confusing advice.

How so? Obviously this isn't advice for the OP, but it is another way to take money out of an rrsp. Keep in mind you have to make a return on your investment, and assuming long turn markets go up.

[mzdspd]

Originally posted by RealJimmyJames

Dude, sell something, or several somethings before you even think about cashing in RRSP. I'm not an expert on bikes or quads, but you should be able to get ten or fifteen grand out of that fleet pretty easily.

Good luck selling toys right now..

I sold my quad for 900 under what I owed 6 months ago.. It sat on Kijiji for 6 months and I got lucky that a guy from BC came here to buy it. Poor investment but I am out of that payment so lesson learned.

[riander5]

Originally posted by mode13


How so? Obviously this isn't advice for the OP, but it is another way to take money out of an rrsp. Keep in mind you have to make a return on your investment, and assuming long turn markets go up.

Everyone makes money in the stock market, its just that easy.

How can OP even create this thread. Want to keep my toys so im cashing out RRSP. Genius :nut:

[mode13]

Originally posted by riander5


Everyone makes money in the stock market, its just that easy.

How can OP even create this thread. Want to keep my toys so im cashing out RRSP. Genius :nut:

Long term a well balanced portfolio typically will go up. Keep in mind you are already up a few % due to not paying taxes on your rrsp withdrawal. This is not for everyone, and definitely not for the OP. But knowing your options is never a bad thing

[Xtrema]

Originally posted by mode13


- have an investment loan, and withdraw from your rrsp the interest charged. The interest from the loan will cancel out your income gain from withdrawing the rrsp. Invest the loan.

Am I reading this right?

Can you show your math where this move is worth pulling off?

[holden]

Originally posted by schmooot
You know what isn't cool though? When somebody dies their rrsp goes to the beneficiary in full. Nothing taken off the top. Now the estate (or executor which is me in this case) is on the hook for the full brunt of the taxes on said rrsp and have to figure out how to liquidate more than the estate is worth to pay them. Sorry but that part of the system is hugely flawed. The investment firm should not be paying out the entire rrsp without holding back taxes. For this reason I will never invest money in an rrsp. Filthy government. /rant

Why would the taxes be worth more than the RRSP? Aren't you still ending up with more than you had before? Wouldn't it be like saying you don't want to win the lottery because you'll be taxed on it.

Back on topic. Looking at the OP's question and then their vehicle list.. :banghead:

[Skyline_Addict]

Originally posted by holden


Why would the taxes be worth more than the RRSP? Aren't you still ending up with more than you had before? Wouldn't it be like saying you don't want to win the lottery because you'll be taxed on it.

Back on topic. Looking at the OP's question and then their vehicle list.. :banghead:

Yeah. This doesn't make sense at all.

Yes, the estate does inherit the full value of the RRSP before taxes and it is the responsibility of the executor or their representative to appropriately file with the CRA to determine taxes the estate owes. Then the executor or their representative can have an account set up for holdbacks for taxes and other fees owed, which would not exceed the value of the RRSP. Part of the RRSP can be cashed, if not already, while the taxes are being determined and before they are paid.

It sounds like you think you have to square up on the taxes using funds outside the RRSP, as if the funds in the RRSP are frozen until the taxes are paid, but this is not the case. As mentioned above, as executor you have the right to liquidate a portion of the funds you deem necessary to pay taxes, legal fees, etc. immediately upon grant of probate. Even if the RRSP funds make up 100% the value of the estate, under no ordinary circumstances should the executor or beneficiaries be left with nothing (and certainly not be on the hook for money) at any point during the estate process. This extends to any loans, credit card bills, utilities, income taxes, etc owing by the deceased at date of death - they come out of the estate.

Source: my own experience

[know1edge]

.

[Skyline_Addict]

Originally posted by know1edge
By naming a beneficiary, the RRSP bypasses probate and doesn't form part of the estate, but (depends on the beneficiary) the estate is still liable for the taxes.

I think you can file to have the taxes deferred to the beneficiary

Right. You're correct. In my experience the estate was the beneficiary of the rrsp. Either way, I believe similar rules on taxation apply in this case and you should not have to "pay out of pocket" for any taxes owed from an inheritance so to speak or have to pay he taxes before you can "have the money"

[kkkat]

Isn't the whole point of RRSP is to delay your taxes? Reducing your retirement income aside, if you take out $12k (or whatever the tax free bracket is) from your RRSP, you essentially dodge all the tax in that amount, assuming that's the only income you have for the year. Obviously 12k is not much for a year but as far as dodging taxes go, it works.

Ideally, I would sell some toys and still take out the max amount from RRSP that you wouldn't have to pay tax. Put it in TFSA and voila, you never have to pay tax on that money.

[ExtraSlow]

Originally posted by kkkat
Isn't the whole point of RRSP is to delay your taxes? Yes, you defer the taxes until you withdraw the money, and in the year you withdraw, it is taxed at your marginal rate for that year. If you whole income for the year is $12,000, then you are correct that you don't end up paying much tax. I don't know the details about how much they might withhold for taxes.

[Xtrema]

Originally posted by kkkat
Isn't the whole point of RRSP is to delay your taxes? Reducing your retirement income aside, if you take out $12k (or whatever the tax free bracket is) from your RRSP, you essentially dodge all the tax in that amount, assuming that's the only income you have for the year. Obviously 12k is not much for a year but as far as dodging taxes go, it works.

Ideally, I would sell some toys and still take out the max amount from RRSP that you wouldn't have to pay tax. Put it in TFSA and voila, you never have to pay tax on that money.

protected growth and tax deferral. you are hoping that income in the highest bracket is socked away now and when you retires, withdraw and pay tax at lower brackets.

once you know you have too much RRSP which you cant control withdrawal once it converts into RRIF, you should start doing TFSA.

or if you can afford both, do both.