You’ve been contributing to your child’s RESP for years, and now you’re ready to start using those funds. Read on for strategies to make the most of your investment.
But first, check out our short animated guide, which summarizes, in under two minutes, the key considerations when withdrawing funds from your RESP.
It’s up to the subscriber (parent, grandparent, loved one) to make withdrawals from the RESP and decide how to allocate the money throughout the beneficiary’s school career.
Contributions made by the subscriber
Educational assistance payments (EAPs)
Government grants and earnings on contributions and grants
|Belongs to the subscriber, i.e., the person who made the contributions (parent, grandparent, loved one).||Belong to the beneficiary (student).|
Are taxed in the hands of the student and must be added to their income tax return for the year in which they're paid.
DO NOT affect the calculation of student financial assistance (loans and bursaries).
Can be withdrawn all at once or in several installments, according to the subscriber’s needs and goals.
If a withdrawal is made BEFORE the student’s postsecondary enrollment, government grants have to be returned. So, it’s better to wait until you have proof of enrollment in hand before withdrawing any capital.
Withdrawals are limited to $5,000 during the first 13 weeks of enrollment in a qualifying postsecondary program.
After that, you may request any additional amount deemed appropriate, up to the annual limit set out in the Income Tax Act (Canada).*
Withdrawals are limited to $2,500 for every 13-week period of enrollment.
*The amount for 2022 is $25,268. It is indexed annually.
As soon as your child has proof of enrollment in a postsecondary program, you can begin disbursement. We recommend that you ask your child how many years they intend to study. An RESP can remain open for 35 years, so you don’t have to withdraw it all at once. For example, if your child intends to follow a “regular” learning path (two years of CEGEP and three years of university), you can spread the withdrawals over that period. That way, you’ll have funds at your disposal the whole time they’re in school.
From a more technical standpoint, some withdrawal strategies are better than others. Of course, each case is unique, but in general, withdrawing your funds in the following order is a good approach:
Whatever your withdrawal strategy may be, taking everything out at once is generally not recommended. Tapping into an RESP also requires some tax planning. While the capital invested by the subscriber is returned to them tax-free, the same can’t be said for the beneficiary’s EAPs, which are taxed in the student’s name.
Since students typically only work part time and have limited income, they will likely pay little to no tax. Remember, though, that EAP amounts must be claimed in addition to reported income. Withdrawals should therefore be planned carefully, especially for students with more income.
Note that previously, Kaleido eligibility criteria for group plan beneficiaries were more stringent. We have recently relaxed these criteria in response to growing client demand for flexibility; they are now in line with the minimum requirements set out in the Income Tax Act (Canada).
To receive EAPs, the beneficiary must:
If your beneficiary doesn’t enroll in a postsecondary program, don’t panic! Your savings will be reimbursed, subject to investment risk.2 Government subsidies, however, will have to be returned.
Other options are available to you, under certain conditions:3
RESP withdrawals can sometimes seem complicated, but various strategies are available to you. An educational savings plan representative will be delighted to answer all your questions and give you the support you need.