Smart RESP withdrawal strategies
Starting university is an exciting time for students but can be a stressful one for their parents. While it’s natural for parents to be concerned about where their kids will live or what they’ll eat if they’re studying away from home, the biggest worry may be around how to pay for tuition and accommodation.
Fortunately, those who have been saving diligently in a Registered Education Savings Plan (RESP) should have enough money to cover most, if not all, of those costs.
The RESP is certainly an important savings vehicle at a time when higher education is extremely valuable but becoming increasingly expensive. It’s the only financial instrument that tops up contributions by up to 20% through the federal Canada Education Savings Grant (CESG) – and some provinces chip in as well. And a key RESP tax benefit is that it allows contributions to grow on a tax-deferred basis.
However, many people don’t realize that there are RESP withdrawal strategies that can help you draw funds in the most tax-efficient way. With smart planning, your child may be able to cover the costs of their education from their RESP while paying little or no tax.