Tag Archives: budgets

How Much Can We Take from our RRSPs for Our House? How the Home Buyers Plan Numbers Work

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Buying a first home can be very stressful. Most of us will need to find as much money as we can to make a good down payment. A common source of down payments in Canada is withdrawals from personal Registered Retirement Savings Plans under a program called the Home Buyers Plan. It’s not always clear exactly how much you can withdraw. Here are the rules.

No RRSP, No Luck

If you don’t have any money in your RRSP, you can’t get any money out of it when you purchase your home.

Small RRSP, Small Down Payment

If you do have money in your RRSP and you have less than or exactly $25,000, and it’s been there for at least 3 months (90 days) before you want to use it to buy your home, you can take the whole amount out.

Whopping RRSP, Modest Down Payment

If you have more than $25,000 in your RRSP, and it’s been there for at least 3 months (90 days) before you want to use it to buy your home, you can only take out $25,000. Any additional withdrawals from your RRSP will be added to your income for the year and taxed at a your highest tax rate. You won’t be able to re-contribute those withdrawals above $25,000 in later years, either. And you will have to pay some of the income tax owing on the money before you can withdraw it not just by April 30.

Buying a First Home with a Spouse

Your spouse can also make a withdrawal following the same rules. So the most you two could withdraw as a combined total is $50,000.

You Can’t Share RRSP Room with a Spouse

If you have, say $30,000 in your RRSP and your spouse has $20,000 in his RRSP, the most that can be withdrawn is $55,000. You can’t withdraw more than $25,000 even if your partner is short of the maximum.

I Have 3 RRSPs. Can I Withdraw from All of Them?

Sometimes people have RRSPs at several financial institutions. They may have GICs at a trust company, Streetwise Funds at ING Direct, and stocks in a self-directed brokerage account.

You can withdraw your investments from any of your RRSP accounts. The total withdrawal is limited to $25,000 though and it must have been contributed more than 3 months (90 days) before the withdrawal.

Can the Bank Charge Me to Withdraw from my RRSP for the HBP?

Yes.

No tax has to be withheld on withdrawals from a RRSP for the Home Buyer’s Plan. However, a bank or financial institution can still charge you a fee to take out the money. Fees of $100 are not unusual.

If you are getting a mortgage from the bank that holds your RRSPs you may be able to ask to get the fee waived. They should want your mortgage business badly enough to give up the $100 or so fee.

Can I Withdraw Funds from a LIRA or a Group RRSP?

Usually you can NOT withdraw funds from

  • a locked-in retirement account (this is the kind of account you get when you leave a job and they give you some or all of your future retirement funds as a type of RRSP)
  • a group RRSP (these are usually a type of pension plan available through your job)

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Did you use the HBP to help with your down payment? Or are you hoping to? Please share your experiences with a comment.

What If Tomorrow Never Comes? A Reminder to Seize the Day (but Perhaps Not Every Day)

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I think almost every person who writes about saving and retirement planning also writes about balance. Everything about money demands balance. You have to balance your income and your spending. You have to balance your cheque book so the amount in the account matches the amount being withdrawn. You are encouraged to balance your investments between various choices for risk and return, and re-balance your portfolio when it tips out of true. It’s also important to talk about balancing the present and the future.

While it’s good to save for future plans and for retirement, it’s important to balance that with some spending in the present day. Some people use the risk of not living to see another day as an excuse to over-spend and run up massive debts. That’s a ridiculous, unbalanced approach.

But it is essential to do some of your joyful living today.

Recently I found out acquaintances of my parents have got the news many of us dread to hear. The husband has stage 4 cancer. While he is young and otherwise healthy and therefore prepared to try any treatment that may result in remission, the truth is his future looks very uncertain.

Fortunately, this couple has always tried to live a balanced life. They didn’t wait till retirement to start enjoying the benefit of their difficult but well-paid jobs. They have already moved to a home that fits their ideals of being on the water in a rural, natural setting. They have travelled not everywhere they want but to some of the places they most want to visit. They have taken time to enjoy their lives and their family and friendships.

Imagine if they had lived differently? Imagine if they had postponed all of their travel, their new home, their evenings of wine and fellowship till they reached a goal of early retirement? How would they feel now if their bank accounts were full but the clock was slowing to a stop?

Finding the balancing point of any object is a meticulous exercise. If you’ve ever balanced a pencil on your fingertip, you know it can’t be done without thought and care. And conditions can change: a breeze can develop; a tremor can begin. Keeping the object in balance requires a steady stream of minor (and sometimes major!) adjustments.

I encourage you to face your life with that same mindful search for balance. Don’t end up over your ears in debt by trying too much too fast. But plan for and include as many moments of joy and personal satisfaction as you can within your daily life. Every so often, ask yourself the clichéd, “If I should die tomorrow, what would I truly regret not having done?” and then take measured steps towards reducing or eliminating those regrets.

I hope my parents’ acquaintance finds a return to good health. He’s a good man and deserves to continue to enjoy his life with his wife, family and friends as they had all expected and planned.

If you haven’t in a while, take some time tonight and reflect on what you hope to achieve while you are here and what goals you can afford to accomplish sooner rather than never.

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Have you or a friend faced bad news? Was there any comfort in looking at how you had balanced your life so far, or were you left wishing others could learn from your example? Please share your experiences with a comment.