Using RRSPs to Pay Down Debt

Using RRSPs to Pay Down Debt

Decision
Decision

Dealing with debt can be very stressful and people often resort to casing in their RRSPsor other investments to pay down or pay off debt.

Before you cash in your savings you should consider the following:

The time value of money – RRSPs are meant to help provide income for you during your retirement.  Every dollar you deposit today accumulates interest.  A dollar that you withdraw today could equal several dollars by the time you retire.

Tax implications – the money that you get from your RRSP is considered taxable income for the year it is withdrawn and sufficient taxes should be withheld.  Not having enough taxes withheld could leave you with a large income tax bill the following year.

If you are unable to keep up with your debt payments you should consult a licensed insolvency trustee to discuss your options before cashing-in any of your investments.   Your investment savings may be exempt from seizure so you may be able to keep them if you file for bankruptcy or settle your debts through aconsumer proposal.

If you have already withdrawn your RRSPs and are still struggling with debt a licensed trustee can help with those debts and any income taxes you might owe as a result of cashing-in your investments. For a free consultation over the phone or in person in Saint John, Moncton, Fredericton or Charlottetown, please contact us.  Powell Associates Ltd. is a licensed insolvency trustee focused on providing debt settlement, proposal and bankruptcy solutions for individualsand businesses.