enrolled?


​RESP money can be withdrawn at any time

when you're enrolled in a qualifying educational program.

  • ​'Qualifying' means 'approved by the government'.
  • There are no limitations on how you can use the funds. 

​

When you withdraw RESP funds...

  • There is no tax on the money your family contributed. 
  • Government grants and all investment income will be added to your taxable income and will be taxed at your marginal tax rate.

not enrolled / dropped out?


​The RESP will have to be collapsed when you turn 35

if you don't go to college / university, your program doesn't qualify, or you drop out.


It won't be advantageous from the tax perspective.

  • The government grant portion will be returned to the government, and your family will have to pay income tax on the investment income that accumulated and some penalties.
  • There are some other things they can do too, like move the money to their RRSP account or transfer to another RESP (for example, for your sibling)​​​.​​​

Withdraw your resP

Step-by-step withdrawal from your resp


1. If you plan to attend college or university, check if the program you are studying qualifies (check the Government of Canada website).


2. Check if there are any special rules related to your program.


3. Discuss the withdrawal with your family.

  • Only the person who had set up the RESP can request payments from the account.
  • You automatically can get the government grant portion and the investment income, but the original grant can be returned either to your family or to you.


4. Get your proof of enrolment – the financial institution where you have your RESP will need it.


5. Firm up your withdrawal plan.

If you're withdrawing the entire amount immediately and are not planning to use the money soon, you should be able to move your investment 'in kind' from the RESP to the TFSA (that means 'without having to sell it' and moving cash).  

  • You can sell the investment only when you need cash. 
  • For tax purposes, the withdrawal will still be considered a sale - and you'll pay tax on the income the money has earned while in the RESP.


6. Contact the financial institution and ask about its process to withdraw and move the money to the right account.

7. After you’ve checked that the withdrawal went through and the money is in your account, watch for the RESP tax slip from the financial institution​​.


8. When you believe you emptied the account, check in with the banker to make sure the account is closed.

RESP WITHDRAWAL CONSISTS OF 2 PAYMENTS

​1. All original contributions made by your family - no tax

  • There is no tax on those amounts as your family made the contributions from after-tax income.
  • They can be returned either to the original contributor (called 'the subscriber') or to you, the student (also called the beneficiary) and can be withdrawn at any time.


​2. All of the investment income and government grant amounts - you pay income tax

  • They can only be claimed by you because you will have to pay income tax on them in the year you withdraw the funds​.​

  • ​Government grants are: Canada Education Savings Grant, Canada Learning Bond and provincial equivalents (which exist in some provinces only).

​​​​If you have a RESP, it’s your job to withdraw the funds responsibly 

​so you don't leave any family money on the table.

if you plan your funding a few years in advance...​


Alternatively, you can spread your withdrawals over a few years for as long as you remain in an eligible program. You can receive payments from your RESP for up to 6 months after you graduate.​


This may make sense if your RESP is big and you're also earning a lot of money while studying.  A large RESP withdrawal in a single year may shift your marginal tax bracket higher.  But this is probably not a likely situation.

if you're not sure what your plans are...


​When you start in a qualifying program, consider withdrawing the funds as soon as permissible and moving them to your other tax shelter, the TFSA (assuming you're the age of majority and have contribution room).  You have to make sure that you don't spend the money too early.


1. You can withdraw up to $5,000 in the first 13 weeks of your program.

2. After that, there is no limitation on how much you can withdraw, as long as you stay enrolled.

  • For example, if you start in September, withdraw $5,000 in the fall semester, before the end of the tax year.
  • Then withdraw the rest in the spring semester.


Here's why this makes sense:

1. Take advantage of the lowest tax bracket.

  • Early-college / university are the years when your employment income is probably the lowest it'll ever be and you will pay no income tax or very little on the taxable portion of the withdrawal.

2. Reduce the risk of complications should you drop out and not use all the money in your RESP.

  • When you move the money to your TFSA, there will be no limitation on how it can be used, whether you stay in a qualifying program or not.​

resp withdrawal: how it works

​Check current withdrawal rules directly on the government RESP website to avoid making a mistake.