Comments on: RESP – You Can Withdraw Contributions Without Penalty

By: Four Pillars

Four Pillars — Wed, 28 Oct 2009 16:47:43 +0000

Sampson – I agree up to a point. Once you’ve withdrawn the contributions (which can be paid to the parent) then any withdrawals of grants + growth (payable to the student) are taxable in the hands of the student. So if they end up going to school for 4 years then spreading out the withdrawals over 4 years is likely to be the best tax strategy. Of course then you run the risk of having money still in the RESP if they decide not to finish. Taking out this money asap will increase the tax burden. Summer jobs/part time jobs also can change the equation quite a bit.

So to sum up – I don’t know.

By: Sampson

Sampson — Wed, 28 Oct 2009 15:43:53 +0000

Seems like the best thing would be to withdrawl the maximum annually to decrease the chance there’s left over. The tax savings of keeping the money within the account during the years of school seem negligible.

By: Four Pillars

Four Pillars — Wed, 28 Oct 2009 12:49:05 +0000

CC – the limit of $5,000 is only for the first 13 weeks – not the whole first year. And that only applies to EAP which is basically the grants plus any growth in the account. You can still withdraw any amount of your contributions in that first 13 weeks in addition to the (up to) $5k of EAP earnings.

Good point about not having to show any receipts or anything – all you have to do is prove the kid is enrolled somewhere.

By: Canadian CC

Canadian CC — Wed, 28 Oct 2009 12:38:54 +0000

During the first year at school (eligible for withdrawal), you are allowed to withdraw $5,000.

However, you can withdraw as much as you want (in the hand of your child) after the first withdrawal. The RESP holder (financial institution) will definitely ask you several questions if you want to withdraw 25K in one day but still, you are allowed to do it.

In fact, to withdraw money from the RESP, you simply have to provide a proof that your child is at school. Not rent or budget are required. Therefore, you will never be able to show a 25K tuition bill (unless your kid is going to Harvard ).