Withdrawing from an RESP: How to Access Your Education Savings Strategically

You’ve saved for years, and now your child’s heading off to college, university, or trade school.

Here’s how RESP withdrawals work, and how to access those funds in a way that supports their education and makes the most of your savings.:

 

1. Two Types of RESP Withdrawals
RESP withdrawals fall into two categories:

  • Refund of Contributions (ROC):
    This is the money originally contributed to the plan. You (the subscriber) or the student can withdraw it, and it is not subject to tax.

  • Educational Assistance Payments (EAP):
    These include government grant amounts and investment earnings. EAPs are taxable in the hands of the student, and a T4A slip is issued in their name each year they are withdrawn.

 2. Proof of Enrollment Is Required
Before EAPs can be accessed, the student must be enrolled in a qualifying post-secondary program. An official letter of enrollment from the school’s registrar is typically required to process the withdrawal.

 

3. How Withdrawals Are Taxed

  • ROC: Withdrawn tax-free. No tax slip is issued.

  • EAP: Taxable to the student. A T4A slip will be issued for each year EAPs are paid. Because many students have limited income during their studies, the resulting tax payable is often minimal. 

 

4. Smart Withdrawal Strategies

RESP withdrawals can be used for more than just tuition.
Books, housing, meal plans, transportation, and other school-related costs are all eligible.

Prioritize EAPs while your child’s income is low.
This minimizes the chance of unused grants or paying higher tax later.

5. If Your Child Doesn't Use the RESP

  • You can withdraw your contributions (ROC) tax-free.

  • Any unused government grants must be returned.

  • Investment earnings can be withdrawn as Accumulated Income Payments (AIPs). These are taxed at your marginal rate plus a 20% penalty, unless you transfer them to your RRSP, provided you have contribution room.

  • RESPs can remain open for up to 36 years, allowing time for future education plans to develop.

Final Note: Withdrawal Timing Can Make a Difference

RESP withdrawals aren’t one-size-fits-all. The timing and type of withdrawal can affect how much tax is paid and how effectively your RESP savings are used.

Not sure what makes the most sense for your family?
If you're preparing for education withdrawals or wondering how they fit into your broader financial plans, as always, we’re here to help.


 
 
 

National Bank Financial - Wealth Management (NBFWM) is a division of National Bank Financial Inc. (NBF), as well as a trademark owned by National Bank of Canada (NBC) that is used under license by NBF. NBF is a member of the Canadian Investment Regulatory Organization (CIRO) and the Canadian Investor Protection Fund (CIPF), and is a wholly-owned subsidiary of NBC, a public company listed on the Toronto Stock Exchange (TSX:NA).

The information contained herein has been prepared by Vanessa Benedict, a Wealth Advisor at NBF. The opinions expressed do not necessarily reflect those of NBF.

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