A growing number of Canadians are plucking money from their retirement savings to fund short-term expenses, according to the second instalment of Toronto-based Bank of Montreal’s eight annual Registered Retirement Savings Plan (RRSP) study.
In fact, 40% of Canadians say they have made a withdrawal from their RRSP. On average, they have withdrawn $20,952, an increase of $3,739 compared to an average of $17,213 last year.
Reasons Canadians surveyed give for withdrawing from their RRSPs include: purchasing a home (27%), paying for living expenses (23%), funding emergencies (21%) and reducing debt (20%).
“We’ve seen a steady increase in the amount of money Canadians are withdrawing from their RRSPs to meet short-term needs; this should be considered only as a last resort,” says Robert Armstrong, vice president of multi-asset solutions at BMO Global Asset Management, in a statement.
Armstrong suggests that Canadians only make premature RRSP withdrawals if they’re planning to buy a new home or pay for continuing education. Those withdrawals may qualify for the Home Buyers Plan or the Life Long Learning Plan, he adds.