After years of saving, post-secondary enrolment has arrived and it’s time to put that RESP money to work. But, how do you withdraw those funds and more importantly, how do you do it smartly? Let’s dig in.
At Knowledge First Financial, you can choose when and how much to withdraw from your RESP, based on your student’s needs. It’s super easy as outlined in the video below:
Before you withdraw, it is helpful to explore the various aspects of RESP withdrawal, so you know how to withdraw the right way. To dig into some of the finer points of RESP withdrawal, check out this webinar and additional information below:
Most RESP subscribers contribute routinely over several years before their child enrols in post-secondary school. So, if you’ve been watching your RESP savings grow over the years without paying close attention to the details, you’re not alone. But, when it comes to withdrawals, the contents of your RESP matter.
At the time of your child’s enrolment, your RESP savings will typically consist of:
While you might be tempted to look at the total amount in your RESP as “our savings,” each of these three parts is treated differently when it comes time to withdraw.
|Over the years, you will have made contributions to your RESP using your hard-earned money. This has been the fuel that drove growth in your RESP. Well done!
As a reward, the government has contributed to your RESP through grant money. Also, your RESP savings have likely generated gains through compound growth on both your contributions and government grants. This grant money + investment gains are together considered “RESP income”.
The reason this difference is important is that the way these funds are withdrawn (and the way they are taxed) varies between your contributions and RESP income. We explore those variances below.
As mentioned above, the various contents of your RESP are treated differently when it comes to withdrawal. Let’s have a look at those differences.
|When your child enrols in postsecondary school, your contributions can be withdrawn through a Post-Secondary Education Contribution Payment (PSE). These contributions are returned to you tax-free and you can choose whether you want the funds to be released to you, or your child.||
You also have the option to withdraw your contributions before your child enrols in post-secondary school through a Non-Post-Secondary Education Payment (NPSE). Keep in mind that doing so will result in the government reclaiming grant money they contributed to your RESP, and may result in the closure of your RESP. See Withdrawal Rules + FAQs for more details.
Once a student is enrolled in an eligible post-secondary institution, grants + investment gains can be withdrawn through an Educational Assistance Payment (EAP). This income is taxable upon withdrawal, so it is important to be smart in how you withdraw funds from your RESP to maximize tax savings.
Also, it’s important to note that only the beneficiary (the student) can receive an EAP (i.e. a parent can’t pocket RESP income), so be sure to support your student in understanding the process. We also have a dedicated Student Hub with lots of information to help your student understand EAPs (among other things), so that is an excellent resource to share with them as well.
If your RESP has leftover income that your child did not use for educational purposes, that money can be withdrawn through an Accumulated Income Payment (AIP). Keep in mind that if you aren’t using your RESP income for educational purposes, the government will not allow you to withdraw grant money (i.e. you can only withdraw income from investment gains). AIPs are also taxed very heavily (regular income tax + an additional tax of 20%, or 12% for residents of Quebec), so many RESP subscribers choose to transfer income to an RRSP to avoid this tax. For more information on Accumulated Income Payments, click here.
As explained above, RESP income is taxable. You’d be happy to know, however, that most students enjoy tax-free withdrawals when they withdraw strategically. So, unless you are one of the few people who enjoys paying tax, check out our page dedicated to strategic withdrawal.
Once enrolled in an eligible postsecondary school, the best way to request a withdrawal is online. It’s fast and easy and you can receive your payment in as little as 48 hours! Instructions on how to do that, as well as avenues for other types of withdrawals can be found below.
Educational Contribution Payments and EAPs
Non-Educational Contribution Payments
Accumulated Income Payment Request Form
T1172 Form – Additional Tax on AIPs
T1171 – Tax Withholding Waiver on AIP
RESP money can be used to pay for education costs once you’ve provided proof of enrolment in an eligible program. While there isn’t a hard and fast list of eligible expenses, typical uses include tuition, room and board, books, equipment, and transportation, among other things.
Educational Assistance Payments from your RESP can be withdrawn once the student is enrolled in an eligible program. Simply provide a proof of enrolment and submit a withdrawal request (see Withdrawing from your RESP for more details). The request can be submitted from the time the student enrols until six months after the program is completed.
Can I withdraw my funds early?
In part, but it is rarely a good idea. You can withdraw your contributions before a child enrols, but that will trigger a government clawback of grant money they contributed (after all, they rewarded you based on those contributions).
You can also withdraw income from investment gains before enrolment, but that will require an Accumulated Income Payment, which carries a stiff tax penalty.
You cannot withdraw the grant portion of your RESP prior to enrolment, since that money was provided by the government for the sole purpose of funding your child’s education.
The amount you can withdraw as Educational Assistance Payments will depend on whether the student is enrolled full-time or part-time. In each case, the “13 weeks of consecutive study” is an important milestone, as demonstrated in the chart below.
|Program Type||Description||EAP Withdrawal Limit|
|Full-time studies in Canada||At least 3 weeks long with 10 hours of course work per week||First 13 consecutive weeks: $5,000 maximum
After first 13 consecutive weeks: $25,268 maximum*
|Part-time studies in Canada||At least 3 weeks long with 12 hours of course work per month||Each 13-week semester: $2,500 maximum|
|Full-time studies outside of Canada||At least 3 weeks long at a university, or 13 weeks long at a college or other type of educational institution||First 13 consecutive weeks: $5,000 maximum
After first 13 consecutive weeks: $25,268 maximum*
*Based on 2022 data. Indexed annually.
There is no limit to how much you can withdraw as a Post-Secondary Educational Contribution Payment, but be mindful of how to withdraw the smart way.
For more information on the difference between Educational Assistance Payments and Post-Secondary Educational Withdrawal, visit Withdrawing from your RESP.
Outside the restrictions described above, with your Knowledge First RESP, you can control the amount and timing of withdrawals.
The list of institutions and programs that qualify for RESP Educational Assistance Payments is extensive, which gives you lots of options!
The list includes universities, colleges, technical institutes, religious colleges, and private post-secondary institutions registered under the Private Vocational Schools Act. Check out the Canadian government’s list of designated educational institutions or the list of certified institutions, and feel free to contact us if the name of the post-secondary institution is not included on this list. We’d be happy to further investigate for you.
Qualified programs at a recognized institutions must be:
Things can change, we know. So, if your child chooses a different path besides post-secondary education, you have options. The first suggestion is to keep the plan open, in case your child has a change of heart. Your plan can stay open for a period of 35 years after opening!
Another option is to change the beneficiary of the RESP to a sibling or another child.
You may also choose to withdraw your funds as a Non-educational Contribution Payments and Accumulated Income Payment. For more details on those payment types, check out Withdrawing from your RESP.
Your RESP can remain open for 35 years after opening. If you are approaching that time, simply reach out to us and we will help you withdraw the funds and close the RESP.