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RRSP | Frequently Asked Questions FAQs

Learn about the RRSP Frequently Asked Questions

What are the tax rates on RRSP withdrawals?

The tax rates on RRSP withdrawals depend on the amount withdrawn and the client’s province of residence.

Residents of Canada (Except Quebec):

  • Up to $5,000 ➔ 10% withholding tax
  • $5,000 to $15,000 ➔ 20% withholding tax
  • Over $15,000 ➔ 30% withholding tax

Quebec Residents:

  • Up to $5,000 ➔ FED 5% + PQ 16% = 21% total
  • $5,000 to $15,000 ➔ FED 10% + PQ 16% = 26% total
  • Over $15,000 ➔ FED 15% + PQ 16% = 31% total

What are the options for an RRSP when a client turns 71?

In the year a client turns 71, they must choose one of the following options for their RRSP:

  • Withdraw the funds: Tax will be withheld on withdrawals.
  • Transfer to a RRIF: Funds can be transferred to a RRIF without tax being withheld.
  • Purchase an annuity: Funds can be used to buy an annuity for life or over a number of years without withholding tax.

If no action is taken by the end of the year, the RRSP will be deregistered, and the full amount will be taxed as income.

Can the spousal or common-law partner designation be removed from an RRSP after a divorce or separation?

Yes, the spousal or common-law partner designation can be removed after a breakdown of a marriage or similar union if the following conditions are met:

  1. The RRSP annuitant no longer lives with the contributing spouse or common-law partner.
  2. No spousal contributions were made to the RRSP in the year of the request or the two preceding years.
  3. No withdrawals have been made from the RRSP in the year the request is submitted.

What is a spousal RRSP?

A spousal RRSP is an RRSP where the contributing spouse or common-law partner makes contributions to the plan in the name of the annuitant. The contributing spouse benefits from the tax deduction, but withdrawals made within three years of the last spousal contribution are taxed in the hands of the contributing spouse due to the 3-year attribution rule.

Can a spousal RRSP be transferred to a non-spousal RRSP?

No, a spousal RRSP cannot be converted to a non-spousal RRSP. However, if the conditions for removing the spousal designation (such as separation or divorce) are met, future contributions would be considered non-spousal.

What happens if the contributing spouse dies before the RRSP annuitant?

If the contributing spouse dies before the RRSP annuitant, the spousal RRSP remains in the name of the original annuitant. Future withdrawals from the account will be taxed in the annuitant’s hands, regardless of the attribution period.

Can an RRSP be transferred to another RRSP?

Yes, an RRSP can be transferred to another RRSP, either within the same financial institution or to another institution, without triggering any tax consequences, as long as the transfer is done as a direct transfer.

Can an RRSP be transferred to a spouse upon death?

Yes, an RRSP can be transferred to a spouse or common-law partner’s RRSP or RRIF upon death without immediate tax consequences. This is known as a spousal rollover and ensures that taxes are deferred until the funds are withdrawn by the surviving spouse.

Can I contribute to an RRSP after age 71?

No, you cannot contribute to your own RRSP after December 31 of the year you turn 71. However, if you have a spousal RRSP, you can continue contributing to it until your spouse or common-law partner turns 71.

Can an RRSP be transferred to a child or beneficiary upon death?

Yes, but the amount transferred is considered fully taxable in the year of death, unless the beneficiary is:

  • A financially dependent child or grandchild who is under 18 or disabled, in which case special rollover provisions may apply.

What is the Home Buyers' Plan (HBP)?

The Home Buyers' Plan (HBP) allows eligible individuals to withdraw up to $35,000 from their RRSP to buy or build a qualifying home for themselves or a related person with a disability. Withdrawals under the HBP are not taxed if they are repaid within a 15-year period.

Can both spouses withdraw from their RRSPs under the HBP?

Yes, both spouses or common-law partners can each withdraw up to $35,000 from their RRSPs under the HBP, for a combined total of $70,000 to buy or build a qualifying home.

What happens if the required HBP repayments are not made?

If HBP repayments are not made as required, the amount that was supposed to be repaid will be added to the client’s income for that year and taxed accordingly.

What is the Lifelong Learning Plan (LLP)?

The Lifelong Learning Plan (LLP) allows individuals to withdraw up to $10,000 per year (to a maximum of $20,000) from their RRSP to finance full-time education or training for themselves or their spouse or common-law partner. Withdrawals under the LLP must be repaid within 10 years.

Can withdrawals be made under both the HBP and the LLP?

Yes, withdrawals can be made under both the Home Buyers' Plan (HBP) and the Lifelong Learning Plan (LLP), but they cannot be used for the same purpose or during the same year. Learn more about withdrawing under HBP and LLP.

Can RRSP contributions be deducted in a different year?

Yes, RRSP contributions can be carried forward and deducted in a future year if the contribution room is available and the deduction is not needed in the year the contribution was made.