Withdrawing money from an RESP:
how does this work?
You’ve been contributing to a Registered Education Savings Plan (RESP) for several years to give your child the education of their dreams, and now the big moment has arrived: your child is about to start their post-secondary studies. So, the time has come to withdraw your investment! Wondering how to proceed? We answer the most frequently asked questions about withdrawing money from an RESP.
How do I withdraw funds from an RESP?
The request for withdrawal and definition of how the funds will be distributed throughout the beneficiary’s school career must come from the subscriber. At the time of the request, the subscriber must specify whether a withdrawal is to be made from contributions (also known as “capital” or “savings”) or from accumulated income. Accumulated income refers to the government grants and returns generated over the years that are intended as payment to the beneficiary in the form of an Educational Assistance Payment (EAP).
At the time of withdrawal, the amount of the contributions is returned to the subscriber and is not taxable. EAPs, on the other hand, are taxable for the student and must be added to their tax return.
Kaleido is here to help you through the withdrawal process.
When to withdraw from an RESP
You can begin the withdrawal process as soon as your child is enrolled in an eligible post-secondary program. You must then contact your RESP provider and provide proof of enrolment in an eligible program. Educational assistance payments can then begin.
After enrolment, you’ll have a clear idea of the number of years your child expects to study and will be able to determine the EAP amount to spread over this period.
Good to know!
You can contribute to an RESP for up to 31 years. You then have until the end of the 35th year following registration of the plan to use the funds before the RESP matures. If your child does not plan to pursue a post-secondary education, it may be wise to keep the RESP open in case they return to school after a few years.
Is there a maximum withdrawal amount?
A maximum of $8,000 per child can be withdrawn during the first 13 weeks of full-time study. For part-time studies, the maximum amount is $4,000 for a 13-week period.
After this initial 13-week period, there is no limit on EAP withdrawal amounts1 as long as they are used for education-related expenses. This can include tuition fees, school supplies and rent, as well as transportation and grocery expenses.
What is the best RESP withdrawal strategy?
As with any savings plan, it’s important to withdraw the RESP strategically to make the most of your investment. Of course, every situation is different, but generally speaking, there’s a certain logic to the order of withdrawal.
We recommend withdrawing the EAPs first. As for capital, it is preferable to withdraw it last. As long as the capital remains in the RESP, it continues to generate tax-sheltered income. That’s why it’s better to leave it in the account for as long as possible and continue to let your contributions grow.
What happens to my RESP if my child doesn’t go on to post-secondary studies?
If your child has chosen not to continue their education after high school, you have several options for disposing of your investment.
Transfer the money to another beneficiary
You can transfer the funds to another RESP if you have several children. Everything depends on the type of plan you opted for when you opened the RESP: individual, family or group RESPs. Your RESP provider will tell you about the various options available under your plan.
Transfer funds to an RRSP or RDSP
If you decide to transfer the funds to an RRSP, you’ll have to repay any government grants received. The amount of your contributions (capital) will remain intact and tax-free. Investment income will be transferable under certain conditions.
In the case of an RDSP (Registered Disability Savings Plan), several conditions must be met. Contact your RESP provider for more information.
Cash in the funds
If you decide to stop contributing to your RESP and close the account, you’ll have to repay the government grants received, but the principal will remain intact and tax-free. You can cash in the funds if the RESP has been open for at least 10 years and the beneficiary is at least 21 years of age and not enrolled in a post-secondary program.
Questions about withdrawing money from your RESP?
Contact our scholarship plan representatives or our Call Centre at 1 877 410-7333. We’ll be happy to answer any questions you may have.
1. Up to the annual limit established by the Income Tax Act (Canada). For 2024, this amount is $28,122. It is indexed annually. For security reasons, certain conditions and/or restrictions may apply.
2. Consult our prospectus for more details.