Study Reveals the Risks to
Cashing in RRSP

Results from a recent Scotiabank survey revealed the risks to cashing in RRSP. It found that 40% of Canadians have made an average of three withdrawals from their RRSPs and nearly half of those who have made at least one withdrawal do not intend to pay it back.

The average amount withdrawn by cashing in RRSPs was $18,000. Of that 37% of the people surveyed said they did so to buy or build a house, or to get a mortgage;

Another 24% took funds to pay down debt and 20% used the money to cover day-to-day living expenses.

What was most insteresting was that the survey revealed that it was the more established investors tended to be most likely cashing in RRSP.

What does this all mean?

I believe that this trend of using retirement savings for lifestyle reasons prior to retirement is a cause for concern.

What is interesting is that despite the tax consequences people are still willing to fund their day to day living expenses now and worry about retirement later.

That's why the next statistic is as much a concern atleast to me. In the event that Canadians were to run out of retirement income, 42% plan to get a part-time job to make ends meet. Even more interesting was that Quebecers tend to be more willing to work part-time than respondants in Ontario.

Is cashing in RRSP the way to go? Well it seems that for most Canadians atleast the people who answered the survey are not averse to the idea of working if they have to.

However, in a 2006 survey comparing the attitudes of employers and consumers regarding aging and retirement around the world.

In Canada 71% of survey respondents said a flexible balance of work, combined with periods of leisure is the most ideal way to spend retirement.

Only 11% said full-time work was an admirable goal, 16% said they would be happiest if they never needed to work for pay again.

To me this is surprising based on the visions of what retirement is supposed to be about, but then again everyone has their own goals and objectives. What is your vision for this next phase of your life? Return from cashing in RRSP is a risk to retirement back cashing in