Oct 13, 2026
By most measures, Gen Z Canadians are exemplary savers, with many funnelling more into their retirement accounts than millennials did at the same age.
But a growing number are also withdrawing those contributions, and doing it more often than older generations did.
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High rent and grocery bills aren’t the only catalyst prompting this behaviour. When the next 10 years feel dizzying and erratic, saving for a retirement four decades away can feel abstract. In fact, a locked-up retirement account can begin to look like an emergency fund to cover more urgent expenses in the present. Knowing what an early withdrawal really costs and where short-term savings belong instead can help young Canadians stay flexible without giving up long-term growth.
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Why are young Canadians pulling money out of their RRSPs?
Gen Z workers, born between 1997 and 2012, are withdrawing from their Registered Retirement Savings Plans (RRSPs) 12% more often than millennials did at the same age and 42% more than Gen X, according to new research from Canada Life.
This trend is not driven by weakening financial principles. In fact, in 2023, the median RRSP contribution among Canadians under 25 was $1,880. That’s more than 20% higher than millennials contributed in 2009, after adjusting for inflation, according to Statistics Canada data reported by The Globe and Mail.
So why tap the account early? The research highlights increased feelings of uncertainty and unease amongst this cohort. According to a Canada Life news release, Gen Z is twice as likely as the rest of the population to consume dystopian content several times a week. That habit, also known as doomscrolling, is linked to workers being less likely to own or enrol in long-term savings, as they view the future as bleak. Young workers are also significantly more likely to talk about existential concerns.
Planning for the decades to come “can be difficult when the next 10 years feel uncertain,” said Kate Nazar, senior vice-president, workplace retirement and savings at Canada Life.
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What does an early RRSP withdrawal actually cost?
It’s important to note that taking money out of an RRSP before retirement triggers an immediate tax hit. Your financial institution withholds 10% on amounts up to $5,000, 20% on amounts over $5,000 up to $15,000 and 30% on amounts over $15,000, according to the Canada Revenue Agency (CRA). However, rates are lower in Quebec, where provincial tax is also withheld.
For example, withdrawing $6,000 to cover a gap in rent would have $1,200 withheld and receive just $4,800. Come next tax season, the full $6,000 is then added to their taxable income for the year, and the amount withheld may not cover all the tax owed.
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The bigger cost is long-term, though. Once you withdraw from an RRSP, you lose that contribution room permanently while also giving up decades of potential tax-sheltered growth.
There are some exceptions to the rule. The Home Buyers’ Plan and the Lifelong Learning Plan let you withdraw for a first home or full-time education without withholding tax, as long as you repay the funds on a set schedule.
Is a TFSA a better home for short-term savings?
To meet financial goals in the near term, such as a move, a car or an emergency cushion, a Tax-Free Savings Account (TFSA) is often the better fit. Withdrawals are tax-free and any amount you take out is added back to your contribution room on Jan. 1 of the following year.
That doesn’t make the RRSP the wrong choice. For money that will be explicitly used in retirement, the upfront tax deduction can make an RRSP the stronger option, especially as your income rises.
What to do now
Canada Life’s research found Gen Z best responds to messages about perseverance and agency rather than fear. With that in mind, here’s what’s within your control:
- Build an emergency fund in a TFSA or high-interest savings account (HISA) so your RRSP doesn’t become your backup plan
- Give each savings goal its own account: a HISA for more immediate matters, a TFSA for the next few years and an RRSP for retirement
- Contribute enough to get your full employer match if you’re offered one
- Check your withholding tax bracket before any RRSP withdrawal, and ask whether the Home Buyers’ Plan or Lifelong Learning Plan applies if you’re looking to purchase a home or return to school
- Automate small, regular contributions so saving happens without a monthly decision
The goal isn’t to lock every dollar away until you turn 65; it’s to build robust savings that can bend without breaking. As one 26-year-old participant in the Canada Life research stated: “I want to know what is within my control.”
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Writer and editor based in Toronto with experience in personal finance, insurance, arts and culture and branded content.
