Reader Question: Is It Savvy To Cash In My RRSP’s To Pay Off Debt?

ONE OF THE HARDEST FINANCIAL DECISIONS OF YOUR LIFE MIGHT BE WORTH IT   A reader question about whether it was savvy to cash in an RRSP to pay off Debt was submitted to Mr.CBB. He forwarded it to me to share my opinion on this topic with all of you. My short answer is that it depends.   Cashing your RRSP’s   There are several factors to consider if you are thinking about cashing your RRSP’s. The age of the person The withholding tax on the funds withdrawn on the RRSP The amount of debt and its’ interest rate The type of investment held in the RRSP The opportunity cost of the withdrawal To keep things simple let me say if you are doing this and are under 30 then it might not be a bad thing. At older ages you have a shorter accumulation period and time and the magic of compound interest work against you. I have always maintained that paying off debt is one of the best investments someone can make. Let’s say you’re carrying a credit-card balance of $1,000 with 18 percent simple annual interest. That’s $180 a year in charges. Pay off that debt […]