Page 75 - A Canuck's Guide to Financial Literacy 2020

75

• 5% of your balance owing
plus
• 1% of your balance owing for each month that your tax return is late, to a maximum
of 12 months
Withdrawing from an RRSP

Ideally, funds from RRSPs/RRIFs are meant to be withdrawn when you're in retirement and
at a much lower tax bracket than when you were when the funds were contributed into the
account. With an RRSP, an account holder would have three types of withdrawal options:

1. Regular Withdrawal
2. Home Buyers' Plan Withdrawal
3. Lifelong Learning Plan Withdrawal

Regular Withdrawal

Withdrawals from RRSP are generally discouraged as when you withdraw, you have to pay
withholding tax plus you permanently lose the contribution room that you withdrew. You
cannot re-contribute the amount that was withdrawn and must earn new contribution room.

Home Buyers' Plan Withdrawal

The Home Buyers' Plan allows Canadian residents who are buying a home, building a
qualifying home for themselves or a related person with disability, to withdraw from their
RRSPs without tax being withheld. The program was initially introduced in 1992 and it's a
popular feature of RRSPs.

Qualifying for the Program
To qualify for the program, you have to be a Canadian resident and you or your
spouse did not own a principal residence during the period beginning January 1st of
the fourth year before the year of withdrawal and ending 31 days before the date you
withdraw the funds.

Example: If you withdraw funds on March 31st 2019, the four-year period begins on
January 1, 2015 and end on Feb 28th 2019.

Amount of Withdrawal
In the 2019 budget, the withdrawal limits under the Home Buyers' Plan went from
$25,000 to $35,000 per account holder. As of date, the withdrawal limit is $35,000.
Both spouses are eligible to participate, for a combined total of $70,000

Repayment of Withdrawal
Any amount withdrawn must be paid back within 15 years, starting the second
calendar year following the year of withdrawal or 60 days following that year.