Mutual Funds
Think Long-Term

Cashing Out Your RRSPs: It Could Cost You More Than You Think

The purpose of a Registered Retirement Savings Plan (RRSP) is to help you save for retirement and you will lose the value of tax deferral if you withdraw for anything other than retirement. However, there are two exceptions when you can take out money without any withholding tax or other tax consequences:

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1. Lifelong Learning Plan

The Lifelong Learning Plan (LLP) allows you to withdraw funds from your RRSP to finance qualifying full-time training or education for yourself, your spouse, or your common law partner. There are limitations and restrictions and you should always consider the effects of the loss of compounding growth. For more information, visit the Canada Revenue Agency website.

RRSPs should always be a last resort for current financing unless you're retired.

2. Home Buyers Plan

The Home Buyers Plan (HBP) allows you to withdraw up to $25,000 in a calendar year from your RRSP, without any tax penalties, to build or purchase a qualifying home for yourself or a related person with a disability.

Generally, the funds have to be paid back to your RRSPs within a period of no more than 15 years, and you will lose compounding growth. Your RRSPs should always be a last resort for current financing unless you are retired. For more information, visit the Canada Revenue Agency website.

A Costly Temptation

With recent economic times, many have lost jobs and experienced financial hardship — making it tempting to withdraw from retirement savings to keep on top of other financial needs.

Since RRSP contributions are tax deferred, withdrawals prior to retirement must be included as income in the year received and will be subject to tax withholding by your institution, unless they are made for the Home Buyers Plan or the Lifelong Learning Plan. In addition, there are other fees and penalties which can add up quickly. But perhaps the most costly is the compounding interest and growth your money would have earned, had you left it in your retirement savings. RRSPs should be one of the last places you take money from during hardship.


Mutual Funds are not insurance products and are distributed through representatives of State Farm Investor Services (Canada) Co. State Farm Investor Services (Canada) Co. is a separate legal entity from State Farm Mutual Automobile Insurance Company, or any of its insurance affiliates.

Please read the applicable Fund Facts before investing. Commissions, trailing commissions, management fees, and expenses may be associated with mutual fund investments.

Mutual Funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer.

Neither State Farm nor its agents provide tax or legal advice. Please consult a tax or legal advisor for advice regarding your personal circumstances.

State Farm Investor Services (Canada) Co. Aurora, Ontario.