Spending money is easy. Everywhere we look, we are constantly being bombarded with inducements to part with our hard-earned cash. And if that cash feels not-so-hard-earned – if it’s the result of a market uptick that pushes up the value of your RRSP, say, or a tax refund – it’s even more tempting to spend it.

But before you reach for your wallet, consider what it will really cost you over time to dip into your RRSP or spend rather than save that tax refund. We crunched some typical numbers for you, and the results might surprise you.

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What’s The real cost of taking
money out of your RRSP early?

Let’s say you take out $5,000 from
your RRSP to pay for a cruise.

You pay 10% tax
right away

At tax time you’ll have
to pay even more

Bringing the cost to


If you’re in the 35% tax
bracket, that’s another $1,250

If you retire in 20 years
and your RRSP has
grown at 4% per year

Now your cruise costs


That’s nearly $11,000 that
WON’T be in your
retirement savings.

So the real cost of your early RRSP withdrawal is


Why you should save
your tax refund

Let’s say you receive a tax refund
each year of around $1,800.

It’s tempting to treat yourself to
a fancy new TV, some cute shoes
or maybe a weekend getaway.

But what if you invested your tax refund in your RRSP instead?


If your RRSP grows at 4% per
year, you’ll have more than
$10,000 in just 5 years.

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