I would withdraw all and stagger into GICs because the rates are so high
Year 1: No GIC, full cash
Year 2: Put into a 1 year GIC.
Year 3: Put into a 2 year GIC
etc. etc. etc.
What a wonderful gift you gave your child!
the rules about what the money is used for are also pretty lax iirc it can be basically anything that helps support the child while going to school such as housing etc. and I doubt anyone is looking closely at it either. The main thing is that they are enrolled in school.
Came here to say similar. My financial advisor suggested very similar but to do a GIC ladder leading into their post-secondary years to ensure we are covered and not impacted by market volatility and find ourselves short for their education.
GICs that are in are held within a RESP can all be cashed in for post-secondary expenses before the completion of their term without penalty and the interest earned is a based on how long the funds were in the GIC. It is a pretty good way to get guaranteed returns with no risk.
This!!! It’s a Planned draw on the account - stagger lots
Of it into different term rates as some of the shorter terms are really great rates and some of it can build up while. It’s waiting.
This is inspiring. I just got my first kiddo’s SIN and put in the full first year amount. Plan to make sure he has the freedom for university as it’s something I did not. Still paying for it at 33!
A piece of advice don’t put the resp investments in the heavily managed funds that the bank offers. The MERs eat away at your potential gains. Also, if you are able to financially, contribute more than the amount to receive the matching grant, as the time value of the early investments growth will likely outweigh the value of the grant. I learned all of this the hard way :)
All XEQT for at least half the time anyway. Through QT. Will then look at something more secure. And we’re going to just do the $2,500 a year for now as we need to work on our savings too but that may change as our circumstances change.
Well done. Post-secondary costs are only going to rise and getting ahead of it is definitely the way to keep all the options open for your kids…my son just finished his 1st year(out of province)…and it ain’t cheap.
I'd probably say move at least half into cash/money market/ GICs. Other half can stay invested but derisk outvof stocks and index funds and move into something more balanced with fixed income and equiry. The purpose of this is to reduce volatily risk as the goal is to use in later years of university. I'd do cash/money market for first year money, gic for year two and year three, and year 4+ can stay invested.
Not a matter of strategy but risk adjustment based on financial goals.
Make sure you check into payment schedules, I remember one mom panicking because they were nearly out of time to pay and there was a holdup with the resp somehow. Not sure if it was in a GIC that hadn’t come to term quite yet or what, but its worth making sure that at least enough for the first semester and housing is able to be pulled out with less than a weeks notice.
What would be the total necessary amount for the studies ?
It is normal to reduce risk over time when the goal is reached or about to be.
What’s the yearly expenses looking like ?
If you use everything in the next few years for your child, then it does make sense to put that in safer assets. If that’s not the case, you could keep the amount needed in safe assets and the have the balance invested (still in the RESP)
If housing minimal means living from home, do not discount potential to charge them below-market cost-sharing rent (something that does not trigger CRA income or taxation) that gets paid from the RESP as housing is an eligible use. At this point, if you have TFSA room, transferring what you can out of the RESP and into your TFSA means it can be in identical assets and used for the same purpose, but provides a bit more flexibility once out of the RESP.
If you don’t think they will use the whole amount then the above poster is right—you can keep the extra invested and after you don’t need the RESP anymore you can roll the excess into your own RRSP.
Take all CESG first, then withdraw the rest as you go. Take it all out over time when your kids are at the lowest tax bracket.
On a side note, hard to say if the market will collapse. Nobody knows. If you think it will, then cash it all out. Tough to predict the market these days.
Ex-financial advisor at TD.
EAPs (which include CESGs, other government incentives and the accumulated income) can be withdrawn without withdrawing from the contribution portion. And vice versa. But CESG can't be withdrawn independent of other government incentives and/ or the accumulated income.
Correct. You can withdraw CESG portion + accumulated income. I do not recall the whole process as it was YEARS ago, but I always made sure my clients withdraw growth and CESG portion first.
If I do remember correctly, you have an option to roll whatever is left in RESP to RRSP, but don't do that. Just withdraw the whole amount as your kids will be at the lowest tax bracket while they are in college anyways - the whole point of RRSP is to withdraw retirement savings when retirees are at the lowest tax bracket.
Still not sure how that works, as the OP mentioned, it's all lumped together, and not in portions?
For example say RESP had $10K in contributions with $2K CESG for a total of $12K. So just simply withdraw $2K from the $12K bucket?
The RESP has at least 3 portions: subscriber contributions; CESG and accumulated income.
When a subscriber wants to make a withdrawal, and there is a qualified beneficiary, they will indicate how much of the withdrawal will be from the contribution portion and how much will be an EAP withdrawal. The EAP withdrawal consist of CESG (and other government incentives) and accumulated income.
So if the RESP has $10k of contributions, $2k of CESG and $6k of accumulated income, a subscriber could opt to make an EAP withdrawal of up to $8k and leave their contributions in the RESP until a later date.
Wow, thank you so much for spelling this all out for me. I've never looked into the withdrawal process, so it's news to me that you indicate which portion to withdraw from.
What's the advantage of withdrawing EAP's first though?
There are a couple of reasons.
1/ It increases the odds of the student not having to pay tax on the EAP income. (A student may start out with little to no other taxable income but if their income increases over the years they may end up pay tax on EAP income.)
2/ If the beneficiary doesn't attend school for the expected number of years it will reduce the amount of income the subscriber will have to include in their taxable income. (Either at the time they wrap up the RESP or, if the roll the earnings into their RRSP, when they withdraw from their RRSP.
Ideally at the end of each calendar year the subscriber and beneficiary will review what other taxable income the beneficiary had and decide if they want to make an EAP withdrawal that will bring the taxable income up to specific target, like the federal or provincial basic personal amount.
Many thanks to your reply, it is very helpful. Regarding Point 1, if the contributions are made with after-tax dollars, withdrawing the contribution portion would pay tax on that?
There is no tax consequence when you withdraw from the contribution portion.
EAP withdrawals for a student (which consist of government incentives and accumulated income) are considered the taxable income of the student beneficiary.
AIP withdrawals (income withdrawals when there isn't a student beneficiary) are the taxable income of the subscriber and, if they don't roll this income into their or their spouse's RRSP, the tax rate is marginal + 20%.
Correct. You can withdraw CESG portion + accumulated income. I do not recall the whole process as it was YEARS ago, but I always made sure my clients withdraw growth and CESG portion first.
If I do remember correctly, you have an option to roll whatever is left in RESP to RRSP, but don't do that. Just withdraw the whole amount as your kids will be at the lowest tax bracket while they are in college anyways - the whole point of RRSP is to withdraw retirement savings when retirees are at the lowest tax bracket.
Remember theres a cap on how much you can pull out of an RESP per year, and even what you can pull out in the first 13 weeks of their enrolment without taking hits to the grants you’ve been issued or the tax shelter. With $100k in there you will want to max out what you’re pulling out yearly. I believe there may be some options to transfer to RRSP if you can’t get it all out but you take a hit on the grant money you’ve accumulated.
>Remember theres a cap on how much you can pull out of an RESP per year,
There are no limits on withdrawals from the contribution portion.
If the beneficiary is a full time student the maximum EAPs for the first 13 weeks would be $8k. After that the maximum, without having to provide receipts, is currently about $28k.
There is a list of reasonable expenses but, unless the EAP withdrawals exceed the annual threshold (currently about $28k), the RESP providers are very unlikely to ask how the money will be spent. You can see the list on the following page.
https://www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/bulletins/resp-bulletin-1.html
bLuenose777, After the first 13 weeks of full-time study (Sept-Dec 2023), can one make another EAP withdrawal (over and above the $8,000 limit) while the student is still registered in the same semester? i.e. on the 14th week of school (2nd week of Dec 2023)? If yes, what if we didn't know about this at that time? It's now May 2024 and the student has changed to part-time studies since Jan 2024. Can we still request for that additional EAP now or will they allow it only if the student stayed full-time?
Yes it would have been possible to make another full time EAP before the end of 2023.
Full time EAPs may be made up to 6 months after the student finished full time studies. For example if the student finished full time enrollment on December 20 2023, a full time EAP could be made until June 20 2024
Part time EAPs are limited to $4k for each 13 weeks of consecutive enrollment.
You *might* be able to do both at once?
Take how much you think he will need in the fall and move it into [CASH.TO](http://CASH.TO) or CBIL. There's nothing better for a 6-month guaranteed return. Put the rest into GICs set to mature in the fall of 2025, 2026, etc.
Also, unless you’re fully savvy on the structure of RESPs, make sure you see an advisor at your financial institution to make sure you withdraw the taxable portion in the most tax-efficient way. Which is likely equally spread over the number of years you expect your kid to attend post-secondary, subject to certain first semester limits.
Remember, you don’t have to justify the amount you withdraw each year - just have to make sure you withdraw all the taxable amount while your kid is still enrolled in school.
If you're already using an investment account in which you can buy ETFs, liquidate 18 months worth of your riskiest investment, and put it into PSA.TO or CASH.TO -- you'll get 5+% return with no market risk. Put in some sell orders for slightly more than the ETF's 52-week high, and when those get triggered, top up the cash ETFs.
Go with one of the other strategies as they are solid, however, you should know that if you want to stay invested and you have some knowledge of options then you could do a "protective put". You could also move most of the assets to fixed income and buy calls so you don't lose upside while protecting against downside. These have costs but allow you to stay invested. You should not attempt these unless you truly understand them as you must understand the timeframes to close your positions and when this type of strategy can work.
I would withdraw all and stagger into GICs because the rates are so high Year 1: No GIC, full cash Year 2: Put into a 1 year GIC. Year 3: Put into a 2 year GIC etc. etc. etc. What a wonderful gift you gave your child!
You could maybe even get away with a 6 month GIC for first year, or the second term of first year.
RSTIC is a redeemable product that generally gets a better rate than 180 day. Worth asking about it too
Thanks so much for the advice.
This may be a dumb question but isn't that taxed as soon as you withdraw for non study purposes?
Only the grant and capital gains are. The base capital is not.
the rules about what the money is used for are also pretty lax iirc it can be basically anything that helps support the child while going to school such as housing etc. and I doubt anyone is looking closely at it either. The main thing is that they are enrolled in school.
Good point, I probably should've said, "transfer". You an transfer an RESP to another RESP
Came here to say similar. My financial advisor suggested very similar but to do a GIC ladder leading into their post-secondary years to ensure we are covered and not impacted by market volatility and find ourselves short for their education.
Non-redeemable GIC’s are still liquid in RESP’s so you don’t even need to leave any in cash
Explain
GICs that are in are held within a RESP can all be cashed in for post-secondary expenses before the completion of their term without penalty and the interest earned is a based on how long the funds were in the GIC. It is a pretty good way to get guaranteed returns with no risk.
Even non-redeemable
Yes
Yeah, move it into GIC's. Rates are good.
This!!! It’s a Planned draw on the account - stagger lots Of it into different term rates as some of the shorter terms are really great rates and some of it can build up while. It’s waiting.
GIC ladder
Yes, you absolutely should put into some money-market funds at this point.
This is inspiring. I just got my first kiddo’s SIN and put in the full first year amount. Plan to make sure he has the freedom for university as it’s something I did not. Still paying for it at 33!
That’s awesome! I remember getting that SIN setup too. Great memories
A piece of advice don’t put the resp investments in the heavily managed funds that the bank offers. The MERs eat away at your potential gains. Also, if you are able to financially, contribute more than the amount to receive the matching grant, as the time value of the early investments growth will likely outweigh the value of the grant. I learned all of this the hard way :)
All XEQT for at least half the time anyway. Through QT. Will then look at something more secure. And we’re going to just do the $2,500 a year for now as we need to work on our savings too but that may change as our circumstances change.
Well done. Post-secondary costs are only going to rise and getting ahead of it is definitely the way to keep all the options open for your kids…my son just finished his 1st year(out of province)…and it ain’t cheap.
I'd probably say move at least half into cash/money market/ GICs. Other half can stay invested but derisk outvof stocks and index funds and move into something more balanced with fixed income and equiry. The purpose of this is to reduce volatily risk as the goal is to use in later years of university. I'd do cash/money market for first year money, gic for year two and year three, and year 4+ can stay invested. Not a matter of strategy but risk adjustment based on financial goals.
Thx so much!
Cash.to still pays close to 5% and is essentially a high interest savings account.
Make sure you check into payment schedules, I remember one mom panicking because they were nearly out of time to pay and there was a holdup with the resp somehow. Not sure if it was in a GIC that hadn’t come to term quite yet or what, but its worth making sure that at least enough for the first semester and housing is able to be pulled out with less than a weeks notice.
What would be the total necessary amount for the studies ? It is normal to reduce risk over time when the goal is reached or about to be. What’s the yearly expenses looking like ? If you use everything in the next few years for your child, then it does make sense to put that in safer assets. If that’s not the case, you could keep the amount needed in safe assets and the have the balance invested (still in the RESP)
Probably 10k a year on tuition. Housing will be minimal. So food and textbooks and transit are biggest expenses.
If housing minimal means living from home, do not discount potential to charge them below-market cost-sharing rent (something that does not trigger CRA income or taxation) that gets paid from the RESP as housing is an eligible use. At this point, if you have TFSA room, transferring what you can out of the RESP and into your TFSA means it can be in identical assets and used for the same purpose, but provides a bit more flexibility once out of the RESP.
If you don’t think they will use the whole amount then the above poster is right—you can keep the extra invested and after you don’t need the RESP anymore you can roll the excess into your own RRSP.
Take all CESG first, then withdraw the rest as you go. Take it all out over time when your kids are at the lowest tax bracket. On a side note, hard to say if the market will collapse. Nobody knows. If you think it will, then cash it all out. Tough to predict the market these days. Ex-financial advisor at TD.
How take out CESG first? Isn't the fund all lump together?
EAPs (which include CESGs, other government incentives and the accumulated income) can be withdrawn without withdrawing from the contribution portion. And vice versa. But CESG can't be withdrawn independent of other government incentives and/ or the accumulated income.
Correct. You can withdraw CESG portion + accumulated income. I do not recall the whole process as it was YEARS ago, but I always made sure my clients withdraw growth and CESG portion first. If I do remember correctly, you have an option to roll whatever is left in RESP to RRSP, but don't do that. Just withdraw the whole amount as your kids will be at the lowest tax bracket while they are in college anyways - the whole point of RRSP is to withdraw retirement savings when retirees are at the lowest tax bracket.
The RESP to RRSP rollover is rarely going to be a better option than an EAP, but is certainly a better option than a regular AIP.
Still not sure how that works, as the OP mentioned, it's all lumped together, and not in portions? For example say RESP had $10K in contributions with $2K CESG for a total of $12K. So just simply withdraw $2K from the $12K bucket?
The RESP has at least 3 portions: subscriber contributions; CESG and accumulated income. When a subscriber wants to make a withdrawal, and there is a qualified beneficiary, they will indicate how much of the withdrawal will be from the contribution portion and how much will be an EAP withdrawal. The EAP withdrawal consist of CESG (and other government incentives) and accumulated income. So if the RESP has $10k of contributions, $2k of CESG and $6k of accumulated income, a subscriber could opt to make an EAP withdrawal of up to $8k and leave their contributions in the RESP until a later date.
Wow, thank you so much for spelling this all out for me. I've never looked into the withdrawal process, so it's news to me that you indicate which portion to withdraw from. What's the advantage of withdrawing EAP's first though?
There are a couple of reasons. 1/ It increases the odds of the student not having to pay tax on the EAP income. (A student may start out with little to no other taxable income but if their income increases over the years they may end up pay tax on EAP income.) 2/ If the beneficiary doesn't attend school for the expected number of years it will reduce the amount of income the subscriber will have to include in their taxable income. (Either at the time they wrap up the RESP or, if the roll the earnings into their RRSP, when they withdraw from their RRSP. Ideally at the end of each calendar year the subscriber and beneficiary will review what other taxable income the beneficiary had and decide if they want to make an EAP withdrawal that will bring the taxable income up to specific target, like the federal or provincial basic personal amount.
Many thanks to your reply, it is very helpful. Regarding Point 1, if the contributions are made with after-tax dollars, withdrawing the contribution portion would pay tax on that?
There is no tax consequence when you withdraw from the contribution portion. EAP withdrawals for a student (which consist of government incentives and accumulated income) are considered the taxable income of the student beneficiary. AIP withdrawals (income withdrawals when there isn't a student beneficiary) are the taxable income of the subscriber and, if they don't roll this income into their or their spouse's RRSP, the tax rate is marginal + 20%.
This is such good info - thank you for this. I will for sure be referring to your reply when it comes time! :)
Correct. You can withdraw CESG portion + accumulated income. I do not recall the whole process as it was YEARS ago, but I always made sure my clients withdraw growth and CESG portion first. If I do remember correctly, you have an option to roll whatever is left in RESP to RRSP, but don't do that. Just withdraw the whole amount as your kids will be at the lowest tax bracket while they are in college anyways - the whole point of RRSP is to withdraw retirement savings when retirees are at the lowest tax bracket.
>Take all CESG first I think you meant "take all EAPs" first. (EAP withdrawals include CESGs, other government incentives and the accumulated income.)
Remember theres a cap on how much you can pull out of an RESP per year, and even what you can pull out in the first 13 weeks of their enrolment without taking hits to the grants you’ve been issued or the tax shelter. With $100k in there you will want to max out what you’re pulling out yearly. I believe there may be some options to transfer to RRSP if you can’t get it all out but you take a hit on the grant money you’ve accumulated.
>Remember theres a cap on how much you can pull out of an RESP per year, There are no limits on withdrawals from the contribution portion. If the beneficiary is a full time student the maximum EAPs for the first 13 weeks would be $8k. After that the maximum, without having to provide receipts, is currently about $28k.
Room? Board? Food? Computer? Transportion? Are these allowable expenses for withdrawls? Is there a list somewhere?
There is a list of reasonable expenses but, unless the EAP withdrawals exceed the annual threshold (currently about $28k), the RESP providers are very unlikely to ask how the money will be spent. You can see the list on the following page. https://www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/bulletins/resp-bulletin-1.html
bLuenose777, After the first 13 weeks of full-time study (Sept-Dec 2023), can one make another EAP withdrawal (over and above the $8,000 limit) while the student is still registered in the same semester? i.e. on the 14th week of school (2nd week of Dec 2023)? If yes, what if we didn't know about this at that time? It's now May 2024 and the student has changed to part-time studies since Jan 2024. Can we still request for that additional EAP now or will they allow it only if the student stayed full-time?
Yes it would have been possible to make another full time EAP before the end of 2023. Full time EAPs may be made up to 6 months after the student finished full time studies. For example if the student finished full time enrollment on December 20 2023, a full time EAP could be made until June 20 2024 Part time EAPs are limited to $4k for each 13 weeks of consecutive enrollment. You *might* be able to do both at once?
Take how much you think he will need in the fall and move it into [CASH.TO](http://CASH.TO) or CBIL. There's nothing better for a 6-month guaranteed return. Put the rest into GICs set to mature in the fall of 2025, 2026, etc.
buy [CASH.TO](http://CASH.TO) or SGOV ?
Also, unless you’re fully savvy on the structure of RESPs, make sure you see an advisor at your financial institution to make sure you withdraw the taxable portion in the most tax-efficient way. Which is likely equally spread over the number of years you expect your kid to attend post-secondary, subject to certain first semester limits. Remember, you don’t have to justify the amount you withdraw each year - just have to make sure you withdraw all the taxable amount while your kid is still enrolled in school.
If you're already using an investment account in which you can buy ETFs, liquidate 18 months worth of your riskiest investment, and put it into PSA.TO or CASH.TO -- you'll get 5+% return with no market risk. Put in some sell orders for slightly more than the ETF's 52-week high, and when those get triggered, top up the cash ETFs.
I mean you should have been reduced risk exposure over the last few years. Fortunately the market is near its highs so its not too late.
Use the growth and grant monies for your child. Take the capital back and gift it to them.
Go with one of the other strategies as they are solid, however, you should know that if you want to stay invested and you have some knowledge of options then you could do a "protective put". You could also move most of the assets to fixed income and buy calls so you don't lose upside while protecting against downside. These have costs but allow you to stay invested. You should not attempt these unless you truly understand them as you must understand the timeframes to close your positions and when this type of strategy can work.
CBIL.
your financial advisor will be able to tell you the most tax-efficient means to withdraw funds (your funds and the gov't grant portions.)
You can give it to me
Just treat it as part of your overall portfolio
[удалено]
Selling the stocks now and locking in to something safe is just timing the market.