38% of Canadians dip into RRSPs early, BMO survey suggests

Almost four out of every 10 Canadians polled in a recent BMO survey admit they've withdrawn money from their RRSP early, and almost a fifth of them don't ever expect to replenish what they've taken out.

According to the poll of 1,500 people, conducted by Pollara but commissioned by Bank of Montreal, more and more Canadians are dipping into their retirement savings to keep their heads above water financially.

In a similar poll last year, 34 per cent of respondents said they hadtappedtheir registered retirement savings plans early. This year, it jumped to 38 per cent.

The survey was conducted online betweenDec.14 and 19. It carries a margin of error of plus or minus2.5 percentage points,19 times out of 20, BMO said.

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The 38 per cent figurecomes from polling Canadians in general, not just thosewho have an RRSP so the percentage of RRSP holders who made withdrawals would be higher.

Of those polled who haddipped into the kitty early, almost a third, 30 per cent, said they hada good reason for doing so: buying a house. Under the Home Buyer'sPlan, Ottawa allows an RRSP-holder to withdrawup to $25,000 from their RRSP if they're going to use the money for a down payment.

But more than a fifth of those who have withdrawn money early said they did so to pay living expenses, and 18 per cent reported they did it to pay down debt two excuses the tax man will not accept as legitimate enough to waive the penalty for doing so.

"It's concerning to see that so many Canadians are dipping into their RRSPs to meet short-term needs, which should only be considered as a last resort," Chris Buttigieg with BMO Wealth Management said in a release announcing the results of the poll.

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There are few ways to withdraw money from an RRSPbefore the age of 71 without a penalty. All things being equal, Ottawa takes a punitive withholding tax of up to 30 per cent of the withdrawal.Some provinces also take a slice.

The funds being taken out don't seem to be small amounts of money, either. According to the poll, the average withdrawal was $17,213 last year, up by more than $1,300 in the past year.Unless it's for a reason the CRA deems to be legitimate, such as to buy a home or to go to school, anyone who took out that much from their RRSPlast year would lose $5,163.90 right off the bat to the federal withholding tax.

While the average withdrawal size and percentage of people who have done so early varies across the country, the consequences can be just as serious.

"Before withdrawing from an RRSP, speak to a financial professional to make sure you have fully considered the ramifications of the early withdrawal tax consequences, and to consider any additional options that may be available to you," Buttigieg said.

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