RESP Withdrawals

Think before you withdraw. 

If you have kids heading to university or college in September you are probably starting to think about dipping into those RESPs. Before you do, here are 4 things you should know about withdrawing from your RESPs. For more information, check the full article by the Globe and Mail.

1. Maximize grants without over-contributing

2. Adjust the asset mix as you get close to drawing the funds

3. Get the money out tax-effectively

4. Deplete the RESPs near the end of university

Overall, the key to withdrawing from your child's RESP is knowing how, and when, to do it in order to fully benefit from it's perks. Below is an example of how to do it;

 To figure out roughly how much EAP money you can withdraw each year without federal and provincial income tax, using 2017 figures. Start with the basic personal tax credit that everyone gets ($11,635 for federal taxes). Then add a tax credit for tuition paid (we’ll assume $9,000 for a full-year at school). Then subtract income (we’ll assume $7,000 from a summer job), offset partly by job-related tax credits for EI, CPP, and employment ($1,465 federally in this example).

In this case you should be able to withdraw roughly $15,100 in EAP money in 2017 without your kid having to pay any significant amount of income tax ($11,635+$9,000-$7,000+$1,465). (If your kid’s gross income is relatively low, you can also transfer up to $5,000 of unused federal tuition credit to a parent.) In this example you would pay no federal tax but would pay a small amount of provincial tax in some provinces because of differences in provincial tax practices.

If you want help managing your children's RESPs call our offices today.