# RSP withdrawal



## dadaswell (Jan 6, 2016)

So, my wife decided to withdraw $51603.00 from her RSP in Dec 2016. We were expecting 30% tax to be withheld. However, the total amount deposited to her bank account is 29,103.20. The amount withheld totals 43.6 %. There are no fees associated with this withdrawal. Am I missing something (besides cash...LOL) ?


----------



## GreatLaker (Mar 23, 2014)

Can't think of a good reason why it would be done that way.

1) Several provinces have a combined Fed/Prov tax rate of approx 43.6%. Maybe someone tried to deduct at your marginal rate instead of the WHT rate.

2) The amount deducted was 51603 - 29103.2 = 22499.8, which is close to what should be deducted on a withdrawal of $75000.

3) Maybe a fat finger on the WHT calculation? Although that seems strange since I would think it would be an automatic calculation.

Did you ask the bank?


----------



## dadaswell (Jan 6, 2016)

GreatLaker said:


> Can't think of a good reason why it would be done that way.
> 
> 1) Several provinces have a combined Fed/Prov tax rate of approx 43.6%. Maybe someone tried to deduct at your marginal rate instead of the WHT rate.
> 
> ...


Not sure what is going on. The withdrawal was from funds outside of a bank, and deposited to a bank account. I will check with her planner next week. 

You may be right about the marginal rate. Who decides what rate the original deduction is made at? We just assumed it would be the government set rate of 30%. My wife's job would put her at the 43.6% rate...if she was still there. But she is not. Her income in 2016 is about $14,500 (before the RSP withdrawal). A low income year in 2016 is the reason she decided to withdraw from her RSP. 

Any other ideas??


----------



## GreatLaker (Mar 23, 2014)

dadaswell said:


> Any other ideas??


Nope. Per CRA it should be 30%.


----------



## naysmitj (Sep 16, 2014)

Agree, it should have been 30% but it will all work out when you file your taxes in the next couple months.


----------



## OptsyEagle (Nov 29, 2009)

The withholding tax will be 30% ...OR... the percentage you want it to be, whatever is greater.

Perhaps your planner was under the impression that your wife wanted the marginal tax rate withheld instead of the statutory minimums. In any case it would not have been a brilliant number to uses since marginal tax rates are the taxes payable on your last dollar earned, NOT the tax owed on your taxable income. That being said, I would suspect more then one financial planner, as well as a slew of Canadians would not fully understand what I just said.

Anyway, as said up thread, it will all get fixed in the spring when she files her 2016 tax return. I would imagine she is going to get a very nice refund this year.


----------



## Parkuser (Mar 12, 2014)

I'd like to ask a slightly peripheral question. I was withdrawing (for the first time) k$10 NET from my RRSP. While talking to the TDDI rep on the phone it sounded like he asked: would I want to withdraw the tax ($2500+fee $25+HST 3.25) from my savings account. It did not register what he was really saying (a senior moment ) and I said no. But it bugs me. Can you cash only the NET portion of the RRSP withdrawal from the RRSP, pay the tax from a non registered account thus leave the tax portion invested?


----------



## heyjude (May 16, 2009)

OptsyEagle said:


> The withholding tax will be 30% ...OR... the percentage you want it to be, whatever is greater.
> 
> Perhaps your planner was under the impression that your wife wanted the marginal tax rate withheld instead of the statutory minimums. In any case it would not have been a brilliant number to uses since marginal tax rates are the taxes payable on your last dollar earned, NOT the tax owed on your taxable income. That being said, I would suspect more then one financial planner, as well as a slew of Canadians would not fully understand what I just said.
> 
> Anyway, as said up thread, it will all get fixed in the spring when she files her 2016 tax return. I would imagine she is going to get a very nice refund this year.


That's what I was thinking too. It jives with the withholding being identical to her historical marginal tax rate. I'm sure it will be reeconciled during the tax season, but it's always annoying to give the government an interest free loan. This reminds me to always make it clear what my expectations are. I just withdrew an RRSP of about $7000, and, as expected, the withholding was 20%.


----------



## My Own Advisor (Sep 24, 2012)

That's the only reasonable explanation...taxes withheld at marginal rate. Otherwise, should be 30% as per CRA for anything over $15,000 at one time.


----------



## OptsyEagle (Nov 29, 2009)

Parkuser said:


> I'd like to ask a slightly peripheral question. I was withdrawing (for the first time) k$10 NET from my RRSP. While talking to the TDDI rep on the phone it sounded like he asked: would I want to withdraw the tax ($2500+fee $25+HST 3.25) from my savings account. It did not register what he was really saying (a senior moment ) and I said no. But it bugs me. Can you cash only the NET portion of the RRSP withdrawal from the RRSP, pay the tax from a non registered account thus leave the tax portion invested?



I can't see why not except that the taxes owed in that case would only be $2000, not $2,500. The reason the difference is there is because when you pay the withholding tax from the RRSP, you not only pay taxes on the withdraw but you also pay tax on the money you use to pay the taxes. I am not sure if every financial institution is set up to allow this but it would make for smaller withdrawals and therefore smaller amounts of taxes owing.

By the way can you not make those withdrawals with TDDI yourself online, and perhaps avoid the $25 service charge?


----------



## Parkuser (Mar 12, 2014)

OptsyEagle said:


> I can't see why not except that the taxes owed in that case would only be $2000, not $2,500. The reason the difference is there is because when you pay the withholding tax from the RRSP, you not only pay taxes on the withdraw but you also pay tax on the money you use to pay the taxes. I am not sure if every financial institution is set up to allow this but it would make for smaller withdrawals and therefore smaller amounts of taxes owing.
> 
> By the way can you not make those withdrawals with TDDI yourself online, and perhaps avoid the $25 service charge?


I've tried to do the transfer on line (I do everything on line) but the message was: "The ‘From’ account you selected does not have any eligible accounts that you can transfer funds to." The "From" was SDRRSP.

Your suggestion of a lower tax makes it even more worth investigation.


----------



## GreatLaker (Mar 23, 2014)

Parkuser said:


> I've tried to do the transfer on line (I do everything on line) but the message was: "The ‘From’ account you selected does not have any eligible accounts that you can transfer funds to." The "From" was SDRRSP.


Same here. I don't think TDDI allows any RRSP/RRIF withdrawals do be done online; you must call in. 

Another quirk with TDDI is they charge $25 fee for partial withdrawal from RRSP, but not from RRIF. So if you plan on withdrawing regularly from your RRSP you can set up a RRIF and move money RRSP -> RRIF -> withdrawal. But beware as RRIF has minimum annual withdrawal whereas RRSP does not.
See here p.6 under Other Registered Account Fees: https://www.td.com/ca/document/PDF/forms/521778.pdf

$25 is not a lot, but it can buy a 12 pack of cheap beer with a little left over.


----------



## OptsyEagle (Nov 29, 2009)

> Your suggestion of a lower tax makes it even more worth investigation


Let us know if you achieve success. I would think most companies will want to take the tax from the RRSP, causing the tax on the tax as I suggested above, because they may not always have another account to take the tax from.



> Another quirk with TDDI is they charge $25 fee for partial withdrawal from RRSP, but not from RRIF.


That is because, for some reason that I don't understand, the public seem to accept the fee for an RRSP but find it outrageous in a RRIF. I guess it is because, most people do not think they will pay it in an RRSP and would always pay it in a RRIF. All that said, it is the same work and record keeping for the institution in both cases.

Also, they never call it a fee for an RRSP withdrawal. They all call it a fee for a "partial de-registration". Most Canadians would not know, when they are setting up their accounts, that a partial de-registration is in fact a withdrawal. That is why they call it that and why they get away with it. Not a very customer friendly business practice though.


----------

