Using RRSPs to your advantage
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We all have dreams, from buying a home to going back to school. But living your dreams takes money. Contributing money to your RRSPs has more advantages then just building a comfortable retirement. If your Group Registered Retirement Savings Plan (RRSP) allows withdrawals, you could consider using the Home Buyers’ Plan or the Lifelong Learning Plan to make your dreams come true.
The federal government’s Home Buyers’ Plan allows first-time homebuyers to use a portion of their RRSPs towards the purchase of a home. If you qualify, you can withdraw up to $25,000 from your RRSP to buy or build a qualifying home. You have 15 years to repay your RRSP. If you don’t repay the amount due in a year, it will be included as income for that particular year. Please refer to the Canada Revenue Agency (CRA) Home Buyers’ Plan guide (RC4135) to obtain more information.
You have to meet certain conditions before you can participate in the HBP, including being a Canadian resident and entering into a written agreement to buy or build a qualifying home. The CRA Home Buyers’ Plan guide (RC4135) will provide you with all the information you need.
There is some debate about using the Home Buyers’ Plan toward the purchase of a home. Anytime you withdraw money from your RRSP, you’re decreasing your future retirement income. However, the Home Buyers’ Plan provides you with the opportunity to access money for a down payment. You can repay your withdrawal to any of your RRSPs, including your Group RRSP with your company and Sun Life Financial.
If you’re eligible for the HBP, you have to complete CRA’s Form T1036 entitled Home Buyers’ Plan Request to Withdraw Funds from An RRSP.
To repay your withdrawal, you have to follow a specific process. Consult the CRA RC4135 guide for more information. Keep in mind you can contribute the repayment to any of your RRSPs. However, once your contribution is made, you have to designate all or part of the contribution as a repayment under the HBP.
If your RRSP allows withdrawals, the Lifelong Learning Plan (LLP) lets you withdraw up to $10,000 a year from your RRSPs to finance a qualifying educational program for you, your spouse or your common-law partner. You can’t withdraw more than $20,000 in total and you have to repay your withdrawal within 10 years. Any amount that you don’t repay when it’s due will be included as income for that particular year. Please consult the CRA Lifelong Learning Plan guide (RC4112) for more information.Keep in mind that withdrawals decrease long-term savings. However, furthering your education or having enough money to buy your first home can also provide long-term benefits. That’s why it’s best to think about pros and cons before deciding to participate in either government program. We also recommend you consult your financial planner.
For more information, or to obtain a free copy of the Home Buyers’ Plan guide (RC 4135) or the Lifelong Learning Plan guide (RC 4112), visit the CRA website at www.cra-arc.gc.ca or call 1-800-959-2221.
If you have a general question or suggestion about this newsletter, please send an e-mail to firstname.lastname@example.org or write to At a Glance Newsletter, Group Retirement Services Marketing, Sun Life Financial, 225 King Street West, 14th floor, Toronto, ON M5V 3C5. This bulletin has been created exclusively for you. It addresses issues to help you with your financial planning and investments.
Group Retirement Services are provided by Sun Life Assurance Company of Canada, a member of the Sun Life Financial group of companies.
Last Update: April 2005