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You don’t have to withdraw all the money in your RESP the moment your plan reaches maturity. You can spread out your withdrawals over the course of your child’s education.
First off, remember that your RESP includes both educational assistance payments (EAPs) and the contributions you invested over the years. These two types of funds have different withdrawal rules; let’s go over these:
EAPs must be withdrawn during school and require proof of the beneficiary’s enrolment in an eligible post-secondary program. During the first 13 weeks of enrolment, the maximum withdrawal is $5,000. Larger payments are permitted afterwards and whenever needed, as long as the beneficiary remains a student. Keep in mind that the amounts are taxable in the student’s hands, meaning it can be tax-smart to spread the withdrawals over several years.
When you want to cash out contributions at plan maturity, there’s one key rule to follow: wait until you have proof of your beneficiary post-secondary enrolment. If you withdraw contributions without this proof, we have to return the grants received for your child to the government, as required by the Income Tax Act (Canada).
Lastly, remember that an RESP can stay open for 35 years after the year the plan was initially opened, which is always good to know in case your teen decides to take a gap year after high school!
To learn more about RESP withdrawals and the factors to consider, read our blog article: Smart RESP Withdrawal Strategies.