Trend of early RRSP withdrawals

By Kate McCaffery | January 8, 2007 | Last updated on January 8, 2007
3 min read

A new survey from Scotiabank has found that 40% of Canadians have made an average of three withdrawals from their RRSPs and nearly half of those who have made at least one withdrawal do not intend to pay it back.

Canadians taking money out of their RSPs withdrew an average of $18,000. Of those, 37% said they did so to buy or build a house, or to get a mortgage; 24% took funds to pay down debt, and 20% used the money to cover day-to-day living expenses. Interestingly, the survey found that established investors tend to be most likely to withdraw money from their RRSPs.

Ian Filderman, director of mutual funds at Scotiabank, says the trend of Canadians using retirement savings for lifestyle reasons prior to retirement is “very concerning.”

“This is occurring despite the tax consequences and, more importantly, investors’ future ability to adequately fund their day-to-day living expenses in retirement.”

Scotiabank says in the event that Canadians run out of retirement income, 42% plan to get a part-time job to make ends meet. Regionally, investors in Quebec are more likely to take part-time jobs than investors in Ontario and Prairie provinces.

Retirement attitudes

Fortunately, it seems that most Canadians are not entirely averse to the idea of retirees working. In a 2006 survey comparing the attitudes of employers and consumers regarding aging and retirement, entitled The Future of Retirement: What the World Wants, HSBC conducted interviews with 21,329 individuals and 6,018 private sector employers in 20 different countries and territories.

In Canada, 71% of survey respondents said a flexible balance of work, combined with periods of leisure is the most ideal way to spend retirement. Only 11% said full-time work was an admirable goal, and 16% said they would be happiest if they never needed to work for pay again.

Among the reasons cited for working later in life, 24% said they needed the money, 23% wanted to have something meaningful or valuable to do with their time, 21% said they wanted jobs to keep physically active, 18% needed mental stimulation, and 11% said they needed jobs for connection with other people.

“Canada is one of the best countries in the world for offering flexible working options for older employees,” say the survey’s authors. “It is also one of the best at actively trying to recruit older workers. Canadian employers believe that when older employees leave the company, they take valuable knowledge and skills with them. Very few Canadian employers encourage employees to take early retirement.”

The Scotiabank survey, on the other hand, suggests not all clients have such a cavalier and carefree outlook. Although the HSBC survey found that “family, friends, good health and not having to worry about money are all viewed as extremely important in achieving a happy old age,” and “Canadians believe good preparation is the key to a satisfying retirement and know that retirement preparation is their own personal responsibility,” 53% of non-retired investors in the Scotiabank survey are concerned that they will outlive their retirement money and 30% admit they have done very little planning for their retirement.

The number of those expressing concern drops significantly for retired investors — 38% say they are concerned, but 29% admit they still have not done much planning. As well, a separate study conducted by Scotiabank last year suggested that Canadians expect to live for about 20 years after the “traditional” retirement age of 65. Non-retired investors estimate they will need $100,000 or less of retirement savings; 56% of retired investors don’t know how much money they will need.

Filed by Kate McCaffery,,


Kate McCaffery