# RRSP Withdrawal...advice



## bflis (Feb 3, 2015)

Ok I know all of the negatives: tax consequences, loss of growth etc the list goes on.

However my GF and I have been through a tough time and I have racked up $6500 in MC debt. I HATE DEBT!

I am wondering if anyone at all would consider withdrawing from an rrsp to pay off this debt.

Here are my stats:

Age 25

Income: 48,000 increase to 55,000 in 2 months

Debt: $6500 currently at 12.5%

My action plan is as follows. My minimum payment is around $200 My action plan is as follows. Paying off this debt would free up some cash flow that I would start contributing into. 
I contribute to a pension at 7% of my income matched with my employer at 7%
Over the next several years I expect my income to grow significantly, so now would be the time to do it being in the smaller tax bracket currently.

Overall I feel that having this debt cleared up will be better for me emotionally and I would vow to never rack up credit card debt again.

I know the right answer is probably to keep it as is but I just wanted to hear some advice.

Thanks,


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## heyjude (May 16, 2009)

12.5%!!!!!

My recommendation would be to tap into the RRSP to clear the debt and never, ever incur credit card debt again.


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## Guban (Jul 5, 2011)

+1
Credit card debt is evil. Never go there if at all possible. You may wish to establish a line of credit to use, only in case of emergencies, at a lower interest rate. Or how about a TFSA?


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## janus10 (Nov 7, 2013)

Have you calculated how much withholding tax would be for you to NET $6,500 from your RRSP? Have you figured out how much tax you'll end up paying on whatever total amount you withdraw from your RRSP is?

Maybe a better lesson is for you to sell things, tighten your belt and live with the anger of how much racking up this credit card debt is to ingrain that "never again" attitude. It may take many months before you finally get rid of the debt but it could strengthen your resolve to maintain your finances to be in a better position when misfortune befalls you in the future.


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## cainvest (May 1, 2013)

janus10 said:


> Maybe a better lesson is for you to sell things, tighten your belt and live with the anger of how much racking up this credit card debt is to ingrain that "never again" attitude. It may take many months before you finally get rid of the debt but it could strengthen your resolve to maintain your finances to be in a better position when misfortune befalls you in the future.


^^ This.

Cut all your extra expenses, so no restaurants, bars, drinking, new toys, etc until you've payed the debt off. Two people with reasobable paychecks should be able to take that amount of CC debt down pretty quickly.


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## Spudd (Oct 11, 2011)

Your minimum payment is 200, but how much are you actually able to pay each month? I assume the bad times are over now and you're just focusing on paying down the debt? I would think, if you and your gf scrimp and save, you should be able to have it paid off fairly quickly without having to tap into the RRSP.


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## My Own Advisor (Sep 24, 2012)

I thought the same thing Spudd. Just focus on paying the debt and avoid tapping RRSP. Lesson learned, no?


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## CalgaryPotato (Mar 7, 2015)

$6500 is such a small amount of money in relative terms, just buckle down and get it paid off. In the meantime see if your bank can give you a line of credit for a much lower rate.


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## RBull (Jan 20, 2013)

You're looking at it the wrong way. Forget minimum payment and forget tapping retirement money to pay a credit card debt at age 25. You are teaching yourself bad habits with raiding long term savings to compensate for a lack of spending control. 

I agree with ratcheting down your expenses now and max out the credit card payments to get rid of it as soon as you can. Learn how to control spending and the discipline of keeping your savings intact. 

Take the right way out, not the easy way out. The lesson you'll learn is invaluable.


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## Charlie (May 20, 2011)

chiming in with the choir...

there will always be tough times.

Leave the RRSP alone.


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## mrPPincer (Nov 21, 2011)

CalgaryPotato said:


> $6500 is such a small amount of money in relative terms, just buckle down and get it paid off. In the meantime *see if your bank can give you a line of credit* for a much lower rate.


As others have said, it doesn't look like a large enough debt to take such drastic measures as tapping into the rrsp imho, with a little self-discipline you should be able to crush it fairly quickly, but as CalgaryPotato suggests, if you can get the debt moved over to a lower interest line of credit or some kind of consolidation loan.. and pay it off asap that would be the route I'd take.


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## Woz (Sep 5, 2013)

Might want to consider applying to a credit card that has a balance transfer promo? With a quick google search I can see a few credit cards that will charge you 0% interest for 12 months if you transfer your credit card balance. Be careful though, if you miss a payment the rate typically sky-rockets.


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## AltaRed (Jun 8, 2009)

mrPPincer said:


> As others have said, it doesn't look like a large enough debt to take such drastic measures as tapping into the rrsp imho, with a little self-discipline you should be able to crush it fairly quickly, but as CalgaryPotato suggests, if you can get the debt moved over to a lower interest line of credit or some kind of consolidation loan.. and pay it off asap that would be the route I'd take.


Ditto. Do not touch the RRSP!

Even if the debt cannot be rolled over to a lower rate such as a LOC or new credit card promotion, at $48k/yr (going to $55k/yr) income, I see no reason why there cannot be another $400/month to be found (on top of the $200/mo minimum payment) towards paying off CC debt. $100/week shouldn't be hard to come by with expenses throttled back. While we don't know what the OP's budget is nor what the OP is already doing to cut back expenses, the easy ones are eliminating dining out, brown bagging lunches, no coffee drive thrus, etc.


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## mrPPincer (Nov 21, 2011)

Also, one thing others I know have done is, simply phone up your CC company, and ask for a lower rate, or if that doesn't work, ask for a manager, and ask for a lower rate.
If they do comply, then pay it down as quick as possible.

If not, there has to be some institution out there that will be more than willing to give you better than those insane CC rates.


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