Canadians are dipping into their retirement savings to fund short-term expenses, says BMO's annual Registered Retirement Savings Plan study released Feb. 15.
The study says 40 per cent of Canadians have made withdrawals from their RRSP. The average withdrawal was $20,952, up $3,739 from last year.
“We’ve seen a steady increase in the amount of money Canadians are withdrawing from their RRSPs to meet short-term needs; this should be considered only as a last resort,” said Robert Armstrong, vice president, Multi Asset Solutions, BMO Global Asset Management. “There are tax consequences associated with withdrawing from your RRSP, so be sure to consult a financial professional to ensure you have exhausted all other options that may be available to you.”
He added that it’s best to only make premature RRSP withdrawals for the purpose of buying a new home or paying for continuing education, as these withdrawals may qualify for the Home Buyers Plan or the Life Long Learning Plan.
The study showed that withdrawals were made to buy a house (27 per cent), to pay for living expenses (23 per cent), to pay for emergencies (21 per cent), and to pay off debt (20 per cent).