According to a survey conducted by BMO, one third of Canadians have withdrawn funds from their RRSPs before retirement.
The poll of more than 2000 people reveals that one in three Canadians have withdrawn an average of $15,908 from their RRSPs. Only a third have repaid the funds, and a quarter of respondents say that they will never pay it back.
Asked why they removed money from their retirement savings, 25% used it to purchase a home, 21% paid off debt, 21% needed cash to help pay living expenses, while 15% needed to cover costs after an emergency such as a car accident or house flood. People in British Columbia removed the highest average amount at $24,100 with the main reason (28%) being that they needed money to buy a home. Those living in the Atlantic provinces took out the smallest average amount, $8,509, and the top reason (34%) was to help pay living expenses.
The report found that 84% of those who made withdrawals from their RRSPs only did so as a last resort, and 75% said they were “very concerned” about the potential consequences of this decision. In particular, 79% were worried about lower retirement income, 77% were anxious about paying withholding taxes at withdrawal, 77% were concerned about not being able to save effectively for retirement, and 62% lamented the loss of contribution room.