Can I Withdraw Cash from my BMO RRIF Even Though My GIC Has Not Matured?

It can happen suddenly: you are managing on your retirement income from CPP, OAS and your annual minimum RRIF withdrawal. But then a sudden expense comes up: maybe you have a fall, break a hip, and need a wheelchair immediately. Maybe the roof blows off in one of these unusually windy storms. You have lots of money in your RRIF for just such an emergency but it is invested in GICs—can you withdraw some cash even if your RRIF GIC has not matured yet?

What Is a RRIF? What Happened to my RRSP?

Written 2023

During the year you turn 71 you can’t keep a RRSP. You have to change it to one of several things. One of the most common choices is to convert it to a RRIF, a Registered Retirement Income Fund, especially if your RRSP was at a bank or credit union. Other choices include buying an annuity (similar to buying a pension) or taking the value out entirely and paying income tax immediately on the entire amount. You can even do a combination: take out some, buy an annuity with some more, and transfer the remainder into a RRIF.

Do I Have to Withdraw Money/Value from my RRIF?

There are federal government rules controlling RRIFs. The most noticeable rule is that you must withdraw some of the savings in your RRIF each year and report the withdrawn amount as income on your annual income tax return. (You can see an approximate % you have to withdraw on the CRA website. There are some quirks.)

What If I Don’t Want to Spend My RRIF Money?

You don’t have to spend the withdrawn amount (though you must pay any income tax owing). You could, for instance, save the withdrawn amount in a bank account or a TFSA. The government just wants to start getting its “share” of the deferred-tax that has been locked up safely in your RRSP/RRIF.

What If I Need to Withdraw More Money Suddenly from my RRIF But It’s Locked Up in GICs?

Many of my older relatives opened bank RRIFs and transferred in their RRSP accounts. Although they could have bought bank mutual funds in their RRIFs, most of them bought guaranteed investment certificates, GICs.

When I saw the GICs, I wondered what would happen if they needed more cash suddenly. I knew they can legally always withdraw more money from their RRIFs. They just must report it on their income tax return and probably have to pay income tax on it. But were these GICs cashable before maturity?

Yes, they are!

We had to help them make an extra withdrawal from a RRIF at BMO and a RRIF at RBC. In both cases, they were able to withdraw the cash immediately even though the money was invested in GICs at the time. The bank representatives said that by law, the RRIF owner must be allowed to make withdrawals at any time.

Of course I strongly recommend you ask the financial institution that administers your RRIF what the rules are for your GICs. Rules can change.

Can I Cash Out My RRIF GIC Early and Re-Invest It in Another RRIF GIC at a Higher Rate?

In most cases, no. Rarely, someone might invest in a fully redeemable/cashable GIC in their RRIF. In that case, they could cash it out and re-invest it. But almost no one buys that kind of GIC in their RRIF.

Be careful you are not tricked by the name the bank uses for your regular RRIF GIC. Because you are allowed to redeem or cash the GIC so that you can make a withdrawal from your RRIF suddenly, the name may say cashable or redeemable. But those kind of GICs can ONLY be cashed early if you take the money out of your RRIF and report it on your income tax return.

Yes You Can Make an Emergency Withdrawal from your RRIF Even If Your Money Is In GICs

As mentioned earlier, I suggest you call the holders of your RRIF and confirm you can make an emergency withdrawal from your RRIF—just in case the rules change.
In the meantime, I’m glad my relatives were able to buy that wheelchair without worry.

Related Reading

  • Transferring a RRSP from BMO InvestorLine to CIBC Investor’s Edge

Why is BMO Offering Me a Personal Line of Credit at a Lower Interest Rate Than My Mastercard?

I’ve had a personal credit card with BMO since I graduated from university just slightly after plastic was invented. I almost never use it because I pay cash for most purchases and we usually use another card for our hotel and airline transactions. When Costco switched to Mastercard a year or two ago, though, I dug out my card and used it once or twice for large items for which I wanted a double record of the purchase. Then suddenly I get an offer in the mail from BMO for a pre-approved personal line of credit at a lower interest rate than my Mastercard and I wondered why?

Should I Get a Personal Line of Credit as an Emergency Fund?

I see people asking this question a lot on financial chat lists. They have been offered a personal line of credit and they ask whether they should accept the offer or if the rate is good enough.

Personally, I don’t see why most people should accept a personal line of credit. What’s the advantage of having another potential source of debt?

But then, I don’t believe most people should make purchases using credit unless they are for exceptionally expensive items like a house, or unless it’s just as a convenience and they will pay the cost in full when the credit card bill arrives. I believe you should save up for that home renovation, new-to-you car, electronic wonder, or vacation trip.

When you save up in advance, *you* get the benefit on the interest on the money: it helps pay for your purchase. When you buy on credit, you lose because you have to pay the lender interest as well as the cost of the item.

And no, I don’t think having a loan from an institution is a substitute for having a true emergency fund. The last thing you want in an emergency is to incur more debt AND have to pay interest on that debt. Set money aside ahead of time to cover emergency expenses. Or figure out who among your friends and relatives could be trusted to help you get through an emergency.

Is It a Coincidence That I Got a LOC Letter Just After Using my BMO Mastercard?

I found the timing of this LOC offer interesting. I’ve never had an offer of a LOC from BMO before, despite having a bank account with them since I was attending university. So why did I get this letter now?

My suspicion is it’s because I used my Mastercard several times in the last year after not using it for a decade.

I’m doubly suspicious because the amount of the PLOC is the same as the credit limit on my BMO Mastercard.

Why Would BMO Offer Me a Line of Credit With a Lower Annual Interest Rate?

I’m not interested in having a line of credit, so I will be shredding this letter from BMO. But I wondered to myself why they would even offer me a loan at their “competitive rate” of 7.2% when my Mastercard has a rate of 17.5%. Wouldn’t they make more money if I had to pay them 17.5% on an outstanding balance than 7.2%.

Then I remembered something I read in the Globe and Mail. The writer said that many people think they will get out of credit card debt by getting a loan, usually a home equity line of credit. But as soon as they pay off the credit card with the HELOC, they start using it again. And before they know it, they have used up the credit limit on their HELOC *and* the credit limit on their credit card. And the bank then makes high interest off the HELOC and even higher interest off the credit card. Double your debt: double their profits.

Is that the strategy behind this BMO offer? I’ll never know. But if it is, they’ll be disappointed in me. I’m still paying off my credit card each time the bill arrives. And I’m not getting a line of credit. And I’ve got an emergency fund that could last me over a year, if I needed it to.

Sorry BMO.

Related Reading

Join In
Do you have a personal line of credit? Do you use it as a chequing account and never pay more than a few dollars of interest? Why do you find a LOC useful? Please share your views with a comment.