How Do I Withdraw Money from RESP Canada?

There are two types of withdrawals: Educational Assistance Payments (EAPs) and Return of Contributions, which may be made when you’re ready to access the funds within your Registered Education Savings Plan (RESP) for educational purposes. The EAP is included in the student’s taxable income but may consist of government grants and investment earnings, an essential way to pay for educational expenses. Return of Contributions, on the other hand, are the initial deposits made into the RESP and can be taken out tax-free.

Tom had just subscribed to an RESP and was naturally not very conversant with the timing of making withdrawals, so he reached out to his provider. The provider explained to him that it would be okay to make withdrawals at any time from contributions but wait until his daughter enrolls in college to withdraw EAPs without penalties.

The critical limits to remember include the following:

• The lifetime limit of $7,200 on the Canada Education Savings Grant (CESG) for the beneficiary.
• $5,000 maximum in EAP withdrawals during the first 13 weeks of your child’s post-secondary education. 

Keeping up to your limits means keeping accurate records of each withdrawal and consulting with your RESP provider before making significant withdrawals.

Susan’s son was halfway through his first semester when she realized they might exceed the EAP limit. By quickly adjusting their withdrawal strategy with their RESP promoter, they managed to stay within the rules and avoid costly penalties.

You have several options if the funds in the Registered Education Savings Plan are not used for educational purposes. You could keep the RESP open—perhaps, at some point in the future, the beneficiary would like to use it for their educational purposes. The other option may involve transferring the RESP to another beneficiary or closing the plan. However, should an individual close the RESP, they have to return all the money from the government grants, including taxes on the investment earnings plus an extra penalty tax.

When the youngest of the Robinsons decided not to go off to college, they had a family meeting with their financial advisor. They decided to reallocate the remaining RESP funds to another family member who is younger, so the government contributions remain in place, as well as to support their family with education.

The good news is that one can use EAPs from an RESP for more than just tuition payments. The process can also facilitate the payment of other incidental expenses, which include books, housing, transport, and supplies, among others. All that will be required of you is to show that such costs are related to the beneficiary’s education.

Emily was filled with relief the moment she found out that the RESP could be used to cover far more than just tuition, dormitory fees, and textbooks, the total killer of any budget. It all went a long way toward easing her financial stress during her first year at University.

Keep things organized: a simple spreadsheet noting the date, amount, and whether it was an EAP or a Return of Contributions will keep everything organized in terms of tracking each withdrawal. Additionally, most RESP providers offer online tools that enable easy tracking of all activities occurring within the account.

When the Martins started withdrawing from their RESP, they created a dedicated folder for all RESP-related documents and statements. This method helped them keep an excellent track of their withdrawals and balances, ensuring they never missed a grant or exceeded limits.

First, go through your RESP agreement’s terms and make sure you understand the RESP withdrawal rules & limits. If the issue isn’t clear or resolved yet, contact your provider. If you are still unsatisfied, feel free to take your complaint to a financial expert.

During a withdrawal process, the Thompson family encountered discrepancies in the reported amounts. The family contacted their RESP provider and was candid about their concerns. Both parties properly cleared the withdrawals.

You can begin withdrawing money from your Registered Education Savings Plan (RESP) when the beneficiary is enrolled in a post-secondary education program at a recognized learning institution. Please note that while your contributions can be withdrawn at any time, Educational Assistance Payments (EAPs), which include government grants and investment income, can only be withdrawn when the beneficiary is enrolled in an educational program.

Being a mother, Linda wanted to get her hands on the RESP money as soon as her son had the university acceptance letter in his hands. She was frustrated that she had to wait until he registered and classes began. By preparing the necessary documents in advance and communicating with her RESP provider, she ensured the funds were available right when her son started his semester.

The contributions you withdraw from the RESP are not taxed. However, Educational Assistance Payments (EAPs) are subject to tax at the beneficiary’s income rate, which is usually minimal due to the low income of students. It’s important to consider how much you withdraw as EAPs each year to manage potential tax impacts effectively.

When Raj withdrew a large amount of money as an EAP for his daughter’s first year at University, he did not consider the tax implications. Fortunately, his tax advisor helped him plan future withdrawals more strategically, spreading out the EAPs to minimize taxes each year.

Yes, you can change the beneficiary of an RESP if the new beneficiary is a blood relative of the original beneficiary. This flexibility allows families to adapt to changing educational paths without losing the financial benefits accrued in the RESP.

After the eldest son of the Chen’s dropped out of college, the parents converted the RESP for that child to their second daughter, who was planning to go to graphic design school. This way, another family member benefited, and the money saved for education was used as intended.

Any overcontribution made over the lifetime limit of $50,000 to each beneficiary shall attract a 1% per month penalty on the contributed amount in excess until the withdrawal is made. For this reason, it is essential that you monitor your contributions.

The Harding family inadvertently exceeded the contribution limit due to a clerical error. They acted quickly to withdraw the excess amount and addressed the penalty fees directly with their RESP provider, effectively resolving the oversight.

Keep in touch with your RESP provider, who will advise you of the rules and limits for regular withdrawals. They can provide detailed information on recent and updated legislative changes that may affect your plan. Also, keeping a record of each transaction and statement will facilitate following up on compliance.

Paul and Anita regularly reviewed their RESP statements and stayed in touch with their RESP promoter. This proactive approach helped them understand each withdrawal’s impact and kept them informed about the regulatory landscape, ensuring they used their RESP funds optimally.

Understanding how to make RESP withdrawals work for you will mean managing them wisely. Whether planning the first withdrawal or understanding potential problems, knowledge and interest with your provider about RESP will ensure your education savings find their way to their purpose.