Can I withdraw from RRSPs to pay bills? + MORE Apr 17th

If a TFSA and an RRSP had a child: The new FHSA

As part of the 2022 budget, the government unveiled its new tax-free first home savings account (FFHSA, but I prefer FHSA as it’s less of a mouthful). And it will be a great way for first-time homebuyers to save up part of their down payment. In a nutshell, here’s what to know about the FHSA:

It allows Canadians to save and invest $8,000 per year, up to a lifetime maximum of $40,000.If you miss contributing in a year, you can’t “make up for it” by carrying forward contribution room in the years to come like you could with a tax-free savings account (TFSA) or a registered retirement savings plan (RRSP).It blends the tax refund benefits that we love with the RRSP, along with the no-strings-attached non-taxation of withdrawals that the TFSA is famous for.Investment income from interest, dividends or capital gains are yours to keep tax-free…

Withdrawing RRSPs when you’re not retired

Ahh, the unexpected bills.

Anonymous, I’ll give you my initial thoughts first, and then I’ll review the cons of withdrawing from your registered retirement savings plan (RRSP) to pay off unexpected bills.

Assuming you’ve incurred the debt yourself and you’re not desperate—and I mean really desperate—don’t pay your bills with an RRSP withdrawal.

You acquired the debt on your own, so I recommend figuring out a way to pay it off without cashing in investments or consolidating loans.

When unexpected bills arrive, cash flow issues are normally the underlying culprit; either not enough income or too much spending. 

What can you do to increase your income or reduce your spending so you can pay off your bills? 

Withdrawing from your RRSP may seem like the easy way out. Paying off a debt by cashing in an RRSP or consolidating loans is just a temporary fix, and it starts a cycle…

Nathalie Hatter is one of those with a new side hustle. A corporate travel executive who planned company getaways, she watched as her career stalled in March 2020. “As soon as Canada advised Canadians not to travel, that’s when companies had to cancel their programs,” says Hatter, who lives in Oakville, Ont.

Hatter has elderly parents, so she needed a new job that would be socially distanced and flexible—like dogwalking. She ordered business cards and handed them out to dog owners in her neighbourhood. Soon, Hatter was relying on her earlier chef’s training to bake artisanal dog treats, which she sold at weekend farmers’ markets. Pivot Dog Biscuits was born. “I was selling out every weekend,” she says.

Now, two years on, Hatter has returned to working as a travel consultant, with a very successful dog treat business on the side…