RRSP Withdrawal Rules Canada | Taxes, Withholding & Penalties

This page is the rulebook for taking money out of an RRSP: withholding tax, how withdrawals are taxed, lost room, and the Home Buyers’ Plan and Lifelong Learning Plan exceptions. The cost of an early withdrawal in dollars is worked through in what happens if you cash out an RRSP early. Every other RRSP topic is in the RRSP and RRIF guide directory.

RRSP Withdrawal Rules

RRSP withdrawals are generally taxable as income, both your original contributions and investment growth (Home Buyers’ Plan and Lifelong Learning Plan withdrawals follow separate rules). Unlike TFSAs, you also permanently lose that contribution room. For a precise estimate of the tax impact before withdrawing, use the RRSP withdrawal tax calculator.

Withholding tax rates

When you withdraw from your RRSP, your financial institution deducts withholding tax at source:

Quebec residents: federal rates are lower (5%/10%/15%), but Revenu Quebec adds a flat 14% provincial withholding on top – combined rates are approximately 19%/24%/29%. Source: Canada Revenue Agency – Tax rates on withdrawals. The withholding rate applies to the entire withdrawal amount, not just the portion above each threshold. Withholding is not the final tax owed – the full withdrawal is added to income and taxed at your marginal rate when you file.

Important: Withholding tax is not your final tax bill. Withdrawals are added to your income and taxed at your marginal rate. You may owe more (or get a refund) when you file your return.

Example: $20,000 withdrawal

If your marginal rate is 40%, you’d owe another $2,000 at tax time (40% of $20,000 is $8,000).

How long does an RRSP withdrawal take?

The financial institution processes the withdrawal, and it can only pay out cash that has settled in the account. CIBC Investor’s Edge, for example, says a withdrawal typically takes 1 to 2 business days to process once the form is received and the funds have settled. What adds time is anything that has to happen first:

• Selling investments. Stocks and ETFs settle 1 business day after the sale, and some mutual funds take 2; the cash can be paid out only after the sale settles.
• A GIC that hasn’t matured. You may have to wait for the end of the term. If the GIC can be cashed in early, the institution has to tell you the penalty and the net amount you’ll receive before you do.
• HBP and LLP withdrawals. The institution needs Form T1036 (HBP) or Form RC96 (LLP) for each withdrawal before it pays out without withholding tax.

Other withdrawals arrive with the withholding tax already taken off, and the T4RSP slip reporting the withdrawal is sent to you by the last day of February of the following year.

Tax-free withdrawal options

If you are comparing home-purchase withdrawals across account types, the FHSA withdrawal rules page is the natural companion.

Home Buyers’ Plan (HBP)

If you don’t repay the minimum each year, that amount is added to your taxable income. See the full HBP withdrawal guide if you are using RRSP funds for a home purchase.

Lifelong Learning Plan (LLP)

• You or your spouse or partner is enrolled full-time in a qualifying educational program at a designated educational institution (part-time if a disability condition is met).
• Up to $10,000 in a calendar year.
• Up to $20,000 in total each time you participate.
• Repay at least 1/10 a year over 10 years.
• Repayment starts the second year after the student stops qualifying for two years in a row, and no later than the fifth year after the first withdrawal.

RRSP vs RRIF withdrawals

If you are approaching conversion age, review the RRSP to RRIF conversion guide before making large withdrawals.

For the withdrawal stage after conversion, see RRIF withdrawal rules Canada.

RRIF minimum withdrawals

After conversion, the RRSP withdrawal rules above give way to RRIF rules. There is no withholding on the required minimum, which is set each year from your age and the January 1 balance; the RRIF minimum withdrawal table lists the rate for every age.

When RRSP withdrawals can make sense

1. Income is very low — Withdraw when in a low tax bracket (e.g., between jobs)
2. Before age 65 — Bridge income before CPP/OAS
3. Before 65, when RRIF income couldn’t be split either: plain RRSP withdrawals never qualify for pension income splitting, and RRIF income only qualifies from age 65, so under 65 withdrawing directly from the RRSP gives up no splitting advantage
4. Estate planning — Draw down RRSP before death to reduce final tax bill

Those situations are easiest to judge within a full retirement income strategy in Canada.

Use the RRSP withdrawal tax calculator before withdrawing to estimate your net proceeds.

When you may want to avoid RRSP withdrawals

1. High income year — Withdrawals push you into higher brackets
2. Before TFSA is maxed — Lose room permanently vs. TFSA
3. Near retirement — Wait for lower-income years
4. Receiving GIS — RRSP income reduces GIS benefits

If you are still making the high-level account choice rather than the withdrawal decision, read TFSA vs RRSP for beginners.

RRSP withdrawals and GIS

For lower-income retirees who qualify for the Guaranteed Income Supplement (GIS), RRSP and RRIF withdrawals can reduce or eliminate GIS payments. GIS falls by at least 50 cents for every dollar of RRSP/RRIF income, starting from the first dollar (for a single senior, about 75 cents per dollar on incomes from $2,048 to $10,496), until it reaches zero at $23,112 of income for a single senior. Those dollar amounts are for October to December 2026 payments, which are based on 2025 income.

This is a powerful argument for either:

1. Drawing down the RRSP before GIS becomes relevant (GIS starts at 65 but is based on the previous year’s income, so withdrawals in the year you turn 63 or 64 can already reduce it)
2. Rebuilding TFSA with after-tax RRSP withdrawals, since TFSA withdrawals do not count toward the GIS income test

If GIS eligibility is expected in retirement, consult GIS payment amounts and income thresholds before deciding on RRSP withdrawal timing.

Related pages

• HBP repayment rules
• RRSP Calculator
• RRSP Contribution Limit 2026
• RRSP Withdrawal Tax Calculator
• Home Buyers’ Plan Calculator
• RRIF Calculator