# RESP - How much is enough?



## piano mom

We've got 2 kids (8 and 11) and have been contributing to a joint RESP since they were born. The portfolio is now almost $65k. When do you know when to stop contributing or do you just keep at it until the max govt grant ($7,200each) is reached for both kids? 

What are you guys doing about your own RESP for your kids?


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## HaroldCrump

My kids are younger, but the plan is to contribute to max out the grant eventually.
I still have a couple of years of contributions to catch up on, but once that is done, the max contribution required will be $5K a year.
I don't see a reason to stop contributing as long as you are able to.
What with rising costs of education these days, and 10 years from now.
And the proceeds from the RESP can be used for multiple purposes, not just tuition.


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## mcu

I have four children and ashamed to say we have yet to start one. We have looked at doing it many times, but still not convinced it is right for us. What if they don't decide to go on to university? what if they go to trading school or a career program...is it still covered? 

What else can you use the cash for of none of them go to university or only half do?


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## GoldStone

My daughter is 13. Her RESP is worth almost $52K. I will keep contributing until I reach the max grant ($7,200).

Where else can you get 20% guaranteed return??


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## piano mom

Here is a good calculator for it. But it is telling me that I already have enough for both to attend 4 years college and still have money left. I find it hard to believe.

Check it out. 
http://www.getsmarteraboutmoney.ca/tools-and-calculators/resp-calculator/


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## Jungle

It can be transferred to your rsp if they don't go, but you will have to give back the free money to the gov.


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## GoldStone

mcu said:


> what if they go to trading school or a career program...is it still covered?


Yes.



mcu said:


> What else can you use the cash for of none of them go to university or only half do?


Roll over to RRSPs if you have room (minus grant... you have to return it).

or

Collapse RESP. You have to return the grant to the government and pay taxes on the growth portion. This is gross oversimplification of course... read the fine print.


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## Ihatetaxes

I will be happy if there is $150k in mine at peak value 16-17 years from now. Glad I started early and have put $2500 per child each year since birth. $32k in the account now, 2 young kids.

We plan on paying 50-70% of all post secondary costs for both kids, at least for an undergrad degree. It's important to my wife and I that they pay some of the cost themselves so to appreciate the opportunity they have (that too many in this world don't).


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## mcu

Does it really cost that much for schooling nowadays? I definately want them to pay a good portion of it themselves so they can take is seriously. I remember going to college and university and so many of my fellow classmates did not give a crap because mom and dad were paying.


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## leoc2

mcu said:


> I have four children....


All you need is 1 child to go to university/college to withdraw the entire RESP without penalty. You don't need to attribute the funds to any specific child.


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## GoldStone

If you end up with too much money in RESP, it's important to use correct withdrawal strategy to minimize taxes.

Withdraw accumulated amount first, while the child is in school. The accumulated amount includes government grant ($7,200) and RESP growth amount. The accumulated amount is taxed in child's hands.

The goal is to withdraw the entire taxable amount while the child is in school.

If there is any money left in the end, hopefully it's your contributions rather than accumulated amount. You can withdraw the contributions tax free.

*ADDED:*

I googled "RESP withdrawals". Here's the top link. It explains the strategy in more details.

http://www.moneysmartsblog.com/resp-withdrawals/


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## jamesbe

Wow going to be lucky kids! I was gifted $3000 my first year of uni, then ha to fend for myself after that. Wish I would have had $20k let alone $50k!


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## leoc2

mcu said:


> Does it really cost that much for schooling nowadays? I definately want them to pay a good portion of it themselves so they can take is seriously. I remember going to college and university and so many of my fellow classmates did not give a crap because mom and dad were paying.


My kids paid 1/2 and we paid 1/2. They were also mandated to save 1/2 of all their part time and summer income through high school. I agree the kids must have skin in the game. A friend told me that he knew someone that told his daughter that she was to pay her own way and to use excel to tally her expenses for the 4 years. On grad day he would write a cheque for his 1/2. He said that made the daughter take saving money very seriously.


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## Four Pillars

I'm letting the grandparents max out the contributions.


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## GoldStone

I'm the one with a $52K RESP. Who said my kid will get all of it?

If you are smart about withdrawals, you can get all your contributions back. Only the grant plus the growth amount will be used on education.

One more time...

*20% return guaranteed*


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## mcu

wow....so I am way behind in the game then and should start saving ASAP! Where do all our taxes go?? How much is an education nowadays anyway? I havefour kids aged 12, 10, 7 and 2. I guess it's getting really later for the 12 year old?

Is RESP tax deductible? so it's a maximum grant of 500/year per child?


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## GoldStone

Not tax deductible, but the growth is tax free until withdrawal time. Similar to RRSP.

$2500 annual contribution attracts $500 grant.

Lifetime grant limit: $7,200


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## GoldStone

mcu said:


> Where do all our taxes go??


RESP grant is a subsidy to the upper-middle class and the wealthy... folks who tend to maximize their RESPs.

I'm not complaining...


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## mcu

so if I missed out on twelve years for my first child, have i lost the grant $$ or can I still dump in the $2500x12 as a lump sum if I had the cash at this moment?

Sorry to hijack your thread @OP, but getting back to her question, how much is enough to have in our RESP?


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## Zeeshan Hamid

mcu said:


> wow....so I am way behind in the game then and should start saving ASAP! Where do all our taxes go?? How much is an education nowadays anyway? I havefour kids aged 12, 10, 7 and 2. I guess it's getting really later for the 12 year old?
> 
> Is RESP tax deductible? so it's a maximum grant of 500/year per child?


RESP is not tax deductible, but you get a grant of $500 / year per child (unless you have low income, you get more). BUt you can make catchup contibution and get grants of one additional year. 

So this year you can make contribution for 2012 and 2011 for the 12 year old. Next year 2013 and 2010. And so on.

Withdrawals are fairly easy. Read up on rules but as long as one child goes to a post-secondary, you can pretty much wipe out the account (some restrictions, do research). 

UWBro


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## piano mom

http://www.hrsdc.gc.ca/eng/learning...esources/promoter/tools/infocapsules/12.shtml

Yes you can play catch up.


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## GoldStone

See this blog post:

Quick Tip: Catch up on RESP Contributions


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## piano mom

GoldStone said:


> If you are smart about withdrawals, you can get all your contributions back. Only the grant plus the growth amount will be used on education.
> 
> One more time...
> 
> *20% return guaranteed*


This is an awesome forum!!! I will do exactly that


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## mcu

GoldStone said:


> I'm the one with a $52K RESP. Who said my kid will get all of it?
> 
> If you are smart about withdrawals, you can get all your contributions back. Only the grant plus the growth amount will be used on education.
> 
> One more time...
> 
> *20% return guaranteed*



Goldstone you sure you can do that? I mean only use the grant $$ part?


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## GoldStone

mcu said:


> Goldstone you sure you can do that? I mean only use the grant $$ part?


I haven't done it myself (my kid is 13).

But, based on everything I read, I'm pretty sure you can do that.

Google "RESP withdrawals" and read the top hits:

www.google.ca/search?q=RESP+withdrawals


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## leoc2

mcu said:


> Goldstone you sure you can do that? I mean only use the grant $$ part?


I have done this. The self directed RESP for my 2 children was linked to my bank account. I controlled the funds that were withdrawn. They did not even know how much I had saved for them. I decided who gets what and how much each get (they were both at uni. at the same time for 2 of the years). To withdraw the money you need to provide proof of enrollment. Since I filled in their tax forms I controlled the amounts reported to CRA. This was useful because I could report larger amounts to the kid who earned less from part time employment. Since they were busy at school during tax season they never asked to review their tax forms. They both benefited from principal and grant. One is a graduate working full time. The other is at grad school. The entire RESP has been spent.


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## CanadianCapitalist

We have 3 kids (6, 6 and 3). Our plan is to contribute as much as we can until we hit the $7,200 maximum CESG grant. That would be $36,000. Since market returns have been modest and likely to remain so, I don't see these accounts growing substantially. Therefore, it is likely that the principal + CESG + returns will be entirely spent on their education. 

If markets shoot up for whatever crazy reason, I see it as a pleasant problem to have. You can always tap into the contributions you had made into the account and use it for some other purpose.


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## dave2012

We have a plan for my son. I wasn't too happy to find out the first year and a halfs contribution went to pay the sales commission.

Last year the company that sold us on an RESP plan sent a cheque for about half the value, hoping we would cash the cheque they dangled in front of us instead of us using the full amount for my sons education. (he hasn't enrolled yet).


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## Four Pillars

For those asking about withdrawal rules and strategies - here is a page of all my RESP articles by category (contributions, withdrawals etc)

http://www.moneysmartsblog.com/resp-reference/

Might be worth a read.


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## Zeeshan Hamid

CanadianCapitalist said:


> We have 3 kids (6, 6 and 3). Our plan is to contribute as much as we can until we hit the $7,200 maximum CESG grant. That would be $36,000. Since market returns have been modest and likely to remain so, I don't see these accounts growing substantially. Therefore, it is likely that the principal + CESG + returns will be entirely spent on their education.
> 
> If markets shoot up for whatever crazy reason, I see it as a pleasant problem to have. You can always tap into the contributions you had made into the account and use it for some other purpose.


Even modest returns have a power of compounding. I am not sure how you define modest, but lets pick 5% (before inflation). I'll assume you've been contributing since your children were born. 

By the time your oldest are 18, you'd have accumulated close to $210,000 on original contribution of $108,000. Interest rates wont stay this low forever and you may be able to earn more since your kids are young and you still have a long enough time horizon.


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## Jungle

Four Pillars said:


> I'm letting the grandparents max out the contributions.


I like this idea but not a parent yet.


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## Jungle

jamesbe said:


> Wow going to be lucky kids! I was gifted $3000 my first year of uni, then ha to fend for myself after that. Wish I would have had $20k let alone $50k!


Yea I got nothing. But for those hoping to have $150K for their kid wow. I hope they go to school and appreciate working for free education. 

Too bad the money charged on books and residence is a huge rip off. Add tuition to that too?


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## MoneyGal

dave2012 said:


> We have a plan for my son. I wasn't too happy to find out the first year and a halfs contribution went to pay the sales commission.
> 
> Last year the company that sold us on an RESP plan sent a cheque for about half the value, hoping we would cash the cheque they dangled in front of us instead of us using the full amount for my sons education. (he hasn't enrolled yet).


UUUUUUUUUUUUUUGH. Back when I was a financial blogger for about a hot second I wrote a piece about those group plans:

http://monkeysjumping.com/wealthy-baker/?p=55

Quoting from the article, from a federal government report on group RESP plans:

The report also outlined a substantial risk of failure associated with group plans, mostly as a result of group RESP providers closing plans or shutting down entirely. Taken together, the criticisms associated with group plans caused the report authors to conclude “In all, there is a significant risk that participants in group plans end up in a worse financial situation as a result of their participation.”


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## mcu

leoc2 said:


> I have done this. The self directed RESP for my 2 children was linked to my bank account. I controlled the funds that were withdrawn. They did not even know how much I had saved for them. I decided who gets what and how much each get (they were both at uni. at the same time for 2 of the years). To withdraw the money you need to provide proof of enrollment. Since I filled in their tax forms I controlled the amounts reported to CRA. This was useful because I could report larger amounts to the kid who earned less from part time employment. Since they were busy at school during tax season they never asked to review their tax forms. They both benefited from principal and grant. One is a graduate working full time. The other is at grad school. The entire RESP has been spent.


Hope this is not too personal, but how much did you have for the two kids and did you find it was enough or needed more?


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## leoc2

mcu said:


> Hope this is not too personal, but how much did you have for the two kids and did you find it was enough or needed more?


Last RESP withdrawal was made a few years ago ... can't remember the starting total because last contribution was made a few years before that. I do remember making yearly contributions that were large enough to get the max free grant money from government. I had also purchased gold coins for the kids in 2004 that helped pay for school. Sometimes I think I was more lucky than smart. Sorry to be so vague but I didn't really need too much more money other than paying for moving them to/from school and co-op placements. Paying to feed them when they lived at home in between semesters and then the odd grocery run when we visited them on campus.


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## Cpt. Fantastic

MoneyGal said:


> UUUUUUUUUUUUUUGH. Back when I was a financial blogger for about a hot second I wrote a piece about those group plans:


Hi MG,

My sister got herself into one of these group plans (without consulting with me first ) She's had it now for a few years. I'm not sure how much money is in it, but I gather not much as she and her husband don't make a lot of money.

Would you advise that she gets out of it? Her daughter will be 4 in August, so plenty of time to "right the ship" and hopefully make something of the fund by the time she turns 17/18. 

Her contract states "Members Termination Rights: After 60 Days, return of all contributions exclusive of interest, less membership fees, depository charges and if applicable, insurance premiums. CESG is returned to the government"

I'm thinking she should pull out of it and take the loss, then put it in something smarter (with my and the CMF's help)

Would you agree?


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## Mall Guy

piano mom said:


> We've got 2 kids (8 and 11) and have been contributing to a joint RESP since they were born. The portfolio is now almost $65k. When do you know when to stop contributing or do you just keep at it until the max govt grant ($7,200each) is reached for both kids?
> 
> What are you guys doing about your own RESP for your kids?


Like mcu, I also have 4 kids, with 3 in university now (working on freedom 85 !). For me, maximizing the plan early enough to get all of my contribution back was the target! 

Yes it does cost that much! I estimate that over the full 8 yrs that it will take the 4 of them to do their undergrad, it will cost around $300-$320,000 (roughly 16 yrs of university at $18-$20,000 per year). They are responsible for a portion (skin in the game as someone mentioned).

I maxed out the contribution room for all 4 in a family plan a couple of years ago (and pushed the money into Canadian banks, REITs and a couple of income funds - REI and PPL for example - in 2009) and tied the RESP together with a dedicated LOC (in my mind anyways). Current expenses exceed the income generate by the RESP, so those expenses go on the LOC (I take the income out monthly, pay down the LOC and charge the kids "account for the future" the interest). I will take some of the equity growth and trim down the LOC, likely as the first two finish (balance the income tax implications on the younger two).

There will come a point when there will just be two, then one enrolled, and at that point I will remove my contribution, and start using the growth in the plan to fund the last couple of years. It will take some planning, but I should be able bring the plan close to $0, even if that means the youngest will be taking out an amount that will put her in a taxable position before she starts working (gladly pay taxes in her tax bracket instead of mine), but there is 5 to 6 years to figure the right mix of foot on and off the gas petal. 

Anyone else doing this, as everyone seems to think in terms of "it's in the plan and not coming back" (and the online calculators never factor this in). I have not met anyone else who is trying to fund their kids education, and get their contribution back or has pushed as much money into an RESP (at the expense of a higher 3.5% mortgage).

The plan kicks out about $20,000 per year ( 8yrs x $20,000 = $160,000) and has currently gained 75% or $150,000 (thanks to banks and REITs in 2009 !!!).

Oh, and one if not two will go on too a graduate degree - oldest and youngest - so I might be adding an additional 8 years to the original 8, and never get that Porsche!


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## Four Pillars

Mall Guy said:


> Current expenses exceed the income generate by the RESP, so those expenses go on the LOC.


This doesn't make a lot of sense - RESPs don't generate income.

You should check out my link upstream and read some of the withdrawal posts. You should be trying to get out more of the growth earlier, don't wait until later.
And for god's sake, don't borrow money to fund educational expenses if there is money in the RESP - take it out!


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## mcu

Mall Guy said:


> Like mcu, I also have 4 kids, with 3 in university now (working on freedom 85 !). For me, maximizing the plan early enough to get all of my contribution back was the target!
> 
> Yes it does cost that much! I estimate that over the full 8 yrs that it will take the 4 of them to do their undergrad, it will cost around $300-$320,000 (roughly 16 yrs of university at $18-$20,000 per year). They are responsible for a portion (skin in the game as someone mentioned).
> 
> I maxed out the contribution room for all 4 in a family plan a couple of years ago (and pushed the money into Canadian banks, REITs and a couple of income funds - REI and PPL for example - in 2009) and tied the RESP together with a dedicated LOC (in my mind anyways). Current expenses exceed the income generate by the RESP, so those expenses go on the LOC (I take the income out monthly, pay down the LOC and charge the kids "account for the future" the interest). I will take some of the equity growth and trim down the LOC, likely as the first two finish (balance the income tax implications on the younger two).
> 
> There will come a point when there will just be two, then one enrolled, and at that point I will remove my contribution, and start using the growth in the plan to fund the last couple of years. It will take some planning, but I should be able bring the plan close to $0, even if that means the youngest will be taking out an amount that will put her in a taxable position before she starts working (gladly pay taxes in her tax bracket instead of mine), but there is 5 to 6 years to figure the right mix of foot on and off the gas petal.
> 
> Anyone else doing this, as everyone seems to think in terms of "it's in the plan and not coming back" (and the online calculators never factor this in). I have not met anyone else who is trying to fund their kids education, and get their contribution back or has pushed as much money into an RESP (at the expense of a higher 3.5% mortgage).
> 
> The plan kicks out about $20,000 per year ( 8yrs x $20,000 = $160,000) and has currently gained 75% or $150,000 (thanks to banks and REITs in 2009 !!!).
> 
> Oh, and one if not two will go on too a graduate degree - oldest and youngest - so I might be adding an additional 8 years to the original 8, and never get that Porsche!


300-320k to go to university??? I thought education in this country was suppose to be cheap or close to free. I never thought it would cost nearly as much as that. Is it like that everywhere or are these specialty/private universities? I don't see how we would get so many international students coming to canada to study because it is cheaper when it costs that much


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## Sherlock

My parents didn't even know what an RESP is. I had to pay off almost 30k of OSAP.


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## HaroldCrump

mcu said:


> 300-320k to go to university??? I thought education in this country was suppose to be cheap or close to free.


He meant total for all 4 kids, not each.

As for education being "cheap", it is subsidized.
Heaven help us for when it is "close to free".


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## crazyjackcsa

To get back on topic, each parent has to decide on their own how much is enough. Some parents want to cover all of their child's expenses, others think the kids should work their own way through. Others fall somewhere in the middle.

I do know how much is TOO much though. When you are severely impacting your (and your kids) quality of life today, that's too much.

My father-in-law gave my now wife 25k when she turned 18 to pay for school, or whatever. No strings, here you go. She saved it, and paid her way through school. When it came time to get married, and start grownup things, it was a god send.

My wife and I are doing the same thing. We plan on giving our kids 50k each in 14 and 16 years. It isn't even that hard. We just use the Canada Child Tax Benefit and the Universal Child Care Benefit money.


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## uptoolate

Costs for university tuition have increased dramatically in the last 20 years as government subsidies have been removed. Tuition for a single year of things like Arts, Science, Nursing, Education are in the 5500 range while Engineering is about 9000, Commerce and Law are 13000 and Medicine is almost 20000. These are ball park numbers in Ontario for Ontario residents. I think the lowest tuitions are still in Quebec for residents. Obviously, room and board adds quite a bit more to the cost if someone is living away from home.

Back in the old days it was possible to escape with no or fairly low debt if you had decent summer jobs and lived like a 'student'. I think the costs of living like a student may have increased faster than inflation as well. 

Time to start saving!


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## HaroldCrump

uptoolate said:


> Costs for university tuition have increased dramatically in the last 20 years as government subsidies have been removed.


I wonder, though...the subsidies might be contributing to _increase_ the costs, rather than _decrease_.
Since the govt. does not set maximums and minimums for any of the component costs, the market auto-adjusts to account for the subsidies.

Like the recent Ontario government's subsidy for post secondary education for families making upto $160K a year.
The market will adjust to the new subsidy and the costs will go up.

Someone said up thread that the RESP is a subsidy for rich families.
I suppose $160K a year income is considered "poor"?
I'd like to be that poor


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## uptoolate

Yes it would be interesting to know the actual effects. I am sure that there are bureaucrats somewhere that claim to know but I would doubt it. Class sizes are way up, university profs salaries - not so much! I've noticed some nice buildings going up but most of them have contributor's names attached to them.

Absolutely on the 'poor' front. That 160k cutoff would likely exclude less than 5% of families. And what is the point. I mean other than the 500 additional government workers that will have to be hired to 'administer' the scheme. Wouldn't one get more bang for buck by just going with an across the board cut? 

Even the income threshold is open to manipulation. Anyone who is self-employed can arrange to be under the number for the years their children are in school without too much trouble.


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## Mall Guy

​


Four Pillars said:


> This doesn't make a lot of sense - RESPs don't generate income.
> 
> You should check out my link upstream and read some of the withdrawal posts. You should be trying to get out more of the growth earlier, don't wait until later.
> And for god's sake, don't borrow money to fund educational expenses if there is money in the RESP - take it out!


FP, thanks for your feedback. Point taken so let me substituted "EAP" in place of "income". I have read many of your posts, and they have been most helpful. Thank you. 

But if I had fully funded the university cost to date with EAP withdrawals, as of September 2012, I would have used up the (substantial) growth (gained by dumb *** luck). I acknowledge that there are unrecognized "paper" gains in the plan, and I can sell those securities and lock in the gain. But that would reduce the cash being generated by the plan from around 8-9% (on the contribution) to 4-6% (on the "locked in" book value). 

We are 7 "university years" into 16 "university years", generates around $20K in EAPs. All four are going to university, perhaps two for post grad degrees. And I want my contribution back at the end of all of this. $1000 +/- a year in interest vs. $200K contribution withdrawal ??? Cheaper than when you do the math on diapers when we had 4 kids under the age of 5 !


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## Sampson

Keep in mind all students receive subsidies.

For normal undergraduate programs, most students are subsidized over $20k per year, that's to actually run the University. The cost sky rockets for professional and graduate programs.


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## Mall Guy

HaroldCrump said:


> He meant total for all 4 kids, not each.


Yes, for all four, for four years x four kids!


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## Cal

Mall Guy - if they all go to the same university perhaps you can get a campus named after yourself for all of your contributions to the university.


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## Mall Guy

Cal said:


> Mall Guy - if they all go to the same university perhaps you can get a campus named after yourself for all of your contributions to the university.


Great idea. Actually, if I could have gotten them to all go to university in the same city (let alone province), I think I would have purchased a house and rented it to them ! I know of a couple of universities that give a family discount for 2 or more students from the same family and for children of alumni.


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## Sustainable PF

Four Pillars said:


> I'm letting the grandparents max out the contributions.


We're accepting contributions as well.

As we aren't big on tons of toys that get produced, shipped, used briefly then discarded we are actually thinking of telling the 3 sets of grandparents that they rotate the Christmas gift each year and the others add to the RESP instead of buying more toys.


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## Mall Guy

Sustainable PF said:


> We're accepting contributions as well.
> 
> As we aren't big on tons of toys that get produced, shipped, used briefly then discarded we are actually thinking of telling the 3 sets of grandparents that they rotate the Christmas gift each year and the others add to the RESP instead of buying more toys.


With 4 kids, it actually got to the point that we told the GPs that if they wanted to give a big chunk of plastic for Christmas, Birthdays, whatever, that it had to be matched with an RESP cheque. The kids already had too much stuff (as you described), it was originally intended to cut down on the plastic junk . . . how does Barbie afford all those houses, cars, boats . . . but it work, and they all got on board. Gifts got smaller and an annual RESP contribution arrived. You may have to put up with a 5 year old getting a card that says "this cheque is for your university education . . ." but that just re-enforces that they are going on to secondary education!


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## Sustainable PF

@Mall Guy - not even sure how we'll deal w/ the annual contributions. I think I prefer to have one big gift from the grandparents. The highlight of their gift getting. Keep the RESP silent until such time they realize Univ. costs a ton, and debt sucks (oh, they will learn DEBT SUCKS) - then learn money was squirrelled away yearly instead of kids toys they don't care about any longer.

We'll see. Mrs. SPF is on board. Phew.


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## Mall Guy

I am sure you will figure it out!


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## charlesthirkell

What if my children decide to go to learn abroad? 
We saved a lot of money for our children in RESP fund, for college/university.
If they wanted to go to school in the US, would they be able to use the RESP for their tuition or it is only valid for Canadian schools?


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## Mall Guy

charlesthirkell said:


> What if my children decide to go to learn abroad?
> We saved a lot of money for our children in RESP fund, for college/university.
> If they wanted to go to school in the US, would they be able to use the RESP for their tuition or it is only valid for Canadian schools?


I briefly looked into this at few years ago. Take a look at the following links:

http://www.hrsdc.gc.ca/eng/learning/education_savings/public/glossary.shtml

"*Qualifying Educational Program*
A course of study that offers credits towards a degree, diploma or occupational skills certificate at the post-secondary level. The program must last at least three weeks in a row, with at least 10 hours of instruction or work each week. *A program at a foreign educational institution must last at least 13 weeks.* Qualifying educational programs include apprenticeships, and programs offered by a trade school, CEGEP, college or university."

http://www.moneysmartsblog.com/resp-grants-in-a-foreign-country-reader-question/


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## chompy

*Tax deducted*



GoldStone said:


> If you end up with too much money in RESP, it's important to use correct withdrawal strategy to minimize taxes.
> 
> Withdraw accumulated amount first, while the child is in school. The accumulated amount includes government grant ($7,200) and RESP growth amount. The accumulated amount is taxed in child's hands.
> 
> The goal is to withdraw the entire taxable amount while the child is in school.
> 
> If there is any money left in the end, hopefully it's your contributions rather than accumulated amount. You can withdraw the contributions tax free.
> 
> *ADDED:*
> 
> I googled "RESP withdrawals". Here's the top link. It explains the strategy in more details.
> 
> http://www.moneysmartsblog.com/resp-withdrawals/


Is there a fixed tax percentage that is deducted when the money is withdrawn (when child goes to school), or does it depend on the provider?
Around how much is it?

Thanks!


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## Mall Guy

chompy said:


> Is there a fixed tax percentage that is deducted when the money is withdrawn (when child goes to school), or does it depend on the provider?
> Around how much is it?
> 
> Thanks!


If it is a withdrawal of EAP (educational assistance payment) for a child in school, the money is taxed in the hands of the child. So depending on the child's tax rate, deductions for school, etc., there may be no additional tax to pay depending on the amount withdrawn.


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## Four Pillars

Mall Guy said:


> If it is a withdrawal of EAP (educational assistance payment) for a child in school, the money is taxed in the hands of the child. So depending on the child's tax rate, deductions for school, etc., there may be no additional tax to pay depending on the amount withdrawn.


I think he is asking about withholding tax on RESP withdrawals. If that is the case, the answer is that is never any withholding tax on RESP withdrawals.


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## charlesthirkell

Mall Guy said:


> I briefly looked into this at few years ago. Take a look at the following links:
> 
> http://www.hrsdc.gc.ca/eng/learning/education_savings/public/glossary.shtml
> 
> "*Qualifying Educational Program*
> A course of study that offers credits towards a degree, diploma or occupational skills certificate at the post-secondary level. The program must last at least three weeks in a row, with at least 10 hours of instruction or work each week. *A program at a foreign educational institution must last at least 13 weeks.* Qualifying educational programs include apprenticeships, and programs offered by a trade school, CEGEP, college or university."
> 
> http://www.moneysmartsblog.com/resp-grants-in-a-foreign-country-reader-question/


Thank you very much, thanks to your link I found a lot of useful information on it !


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## ecs.780

*looking for help*

I hope someone can help please - I read these boards a lot but very rarely post I was recently trying to discover how the EAP payments for RESP's are calculated. We are in a very fortunate situation - 3 kids (6, 9 & 11) and due to grandparent contributions and good market returns the kids RESP is already over $200k. If we keep contributing all grant money will be received in the year each child turns 14. My question is the way the account in growing there will be more than enough for all 3 to go to school with money left over. Obviously contributions can come out no tax consequences, but I want to know how I can be assured that the grant money paid out does not go over the $7200/ child - because the earnings portion will be substantial. Does anyone know if when requesting an EAP if you can specify how much comes from the CESG grant and how much comes from earnings? I hope I have explained myself well enough Thanks!


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## Ponderling

I have 2 kids, now 10 and 13. First was born while we were working overseas, and it was too much hassle to get an RESP started until we were back here. 

Always a Self Directed RESP.

So a lump sum up front to get oldest one caught up when we were back in Canada. 

Then after mortage was paid out a few years ago, I realised that even while putting an average of almost $3000 per kid away to date I would not max out on the 50K per kid of contributions. 

So I made a lump sum contribution early, knowing that the 7,200 CSEG lifetime max will be reached soon. 

That way the RESP holdings will have a few years to grow before I need to draw on them. The balance presently is siting at a few K under 100k. 4-5 years until the first withdrawls. I am hoping for some modest growth in a reasonably diversied portfolio. 

I think that if things play out I will be cash out of pocket for part of the last year of the youngest guy. That projects 20K pay out per kid per year. 

I aim to be semi-retired by then, so lets hope the return projections pan out for me.


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## Four Pillars

ecs.780 said:


> I was recently trying to discover how the EAP payments for RESP's are calculated. ...but I want to know how I can be assured that the grant money paid out does not go over the $7200/ child - because the earnings portion will be substantial. Does anyone know if when requesting an EAP if you can specify how much comes from the CESG grant and how much comes from earnings? I hope I have explained myself well enough Thanks!


I think this article will help:

http://www.moneysmartsblog.com/withdrawing-money-resp-account/


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## ecs.780

Thanks everyone - I did read the article and it certainly helped clarify some things. I am still confused about how the EAP payment is split up between CESG and Alberta Grant (for us) and Earned Income. When I phoned HRSDC RESP department they indicated that I had to keep track of grant paid out but that we should be able to tell our FI how much of the EAP is grant. Our FI RESP department told me that the income earned in the account was not part of the EAP at all and was capital withdrawl. Unfortunately I seem to get a different answer with each person I talk to. I did find an RESP guide for providers on HRSDC's website(below) and found out how they calculated the EAP - but nowhere does it mention how to ensure grant is not overpaid. They use a total balance of CESG to calculate what gets taken - in our case it will be $21,600 ($7,200 x 3 children) and use a % each year - but this means my oldest will automatically have more taken from grant portion (because the "balance" is starting at 21,600 - not 7,200). 

http://www.hrsdc.gc.ca/eng/jobs/student/promoters/user_guide/section3.shtml

Appreciate it if there is anyone out there who feels like reading through that for fun and adding any insights they might have What really bugs me is not knowing - and not being able to find the answer. Thanks in advance!


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## Echo

It should be fairly easy to keep track of the ACES grant portion:

"The ACES Plan will contribute *$500* into the Registered Education Savings Plan (RESP) of every child born to Alberta residents in 2005 and later. As well, *grants of $100* are available to children of Alberta residents *when they turn 8, 11 and 14* in 2005 and later, provided that the children are attending school."


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## LifeInsuranceCanada.com

On a related note, I estimated costs of university for my kids at about $1000 per month. That was based on:
- living at home, coverging tuition, books, travel to school similiar direct costs.
- child paying 1/3 of costs out of their own savings/summer employment earnings

And to date, our costs have been pretty darn close to that. 

And that's why starting an RESP now is so important. You can either find that $1000 out of your pocket when they go to school, or you can have it in their RESP and their undergrad degree is going to cost you next to nothing.


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## ecs.780

Echo - thanks for your comments. I think I'm not explaining myself very well - I know exactly how much each of my kids has received for all the grants. In the Alberta grant, our oldest 2 will receive $300.00 each, our youngest will receive $800.00 (she was born here - the boys weren't). But the confusion comes when according to HRSDC the EAP payments are based on sub-accounts. In our case they will be: CESG (this will total $21,600), the Alberta Grant (total will be $1400) and then the other sub-account will be all of the income earned. The EAP payment is based on the _beginning_ balance of these accounts (when EAP is requested) and that there is a multiplier that determines how much is from each "sub-account" When I calculate according to the HRSDC guidelines, our oldest child (with a 4 year program requesting an EAP of 20k/year) would have about $8800 withdrawn from the CESG portion. Obviously this is not allowed - I am trying to find out if that multiplier can be changed - so that more of the EAP comes from the income instead of CESG to keep the limits. 

(The gist of what we are trying to figure out is: how much do we have to grow this RESP (assuming maximum contributions of 50K/child by the time each child turns 14) in order to pay for a 4 year program at 20k/child for 3 children where upon the last requested EAP - there is $150k worth of original contributions left for us to take out tax-free:encouragement

The following is right from HRSDC

6.1.3. Calculate EAP Portions to Withdraw from Each Available Account

The RESP Promoter uses the following formulas to calculate EAP portions attributable to each incentive amount available in an RESP. Note that these formulas differ if there has been a loss in the plan (no accumulated income).
Formulas for Calculating EAP Incentive Portions Incentive RESP With Earnings RESP with no Earnings
CESG (A x F) / (C - D - E) (A x F) / (B + F + G)
CLB (A x B) / (C - D - E) (A x B) / (B + F + G)
Alberta Grants (A x H) / (C - D - E) (A x H) / (B + F + G)
Other Provincial Incentives (A x Y) / (C - D - E) (A x Y) / (B + F + G)

Where:

A: is the amount of the EAP

B: is the balance in the beneficiary's CLB Account of the RESP immediately before the EAP is made

C: is the fair market value of the property held in connection with the RESP, determined immediately before the EAP is made

D: is the total of all contributions made to the RESP before the EAP is made that have not been withdrawn

E: is the total in all CLB Accounts of the other beneficiaries under the RESP immediately before the EAP is made

F: is the balance in the CESG Account of the RESP immediately before the EAP is made

G: is the total of all amounts paid into the RESP under a designated provincial program (total of all provincial incentive account balances in the RESP immediately before the EAP is made)

H: is the balance in the Alberta Grants Account of the RESP immediately before the EAP is made

Y: is the balance in another provincial incentive account of the RESP immediately before the EAP is made

Formulas for Other Provincial Incentives

Other provincial incentives could use formulas with different variable letters but achieve the same end results.

Calculations for a particular EAP must be performed using the same set of the above values for each amount available in an EAP. RESP accounts are updated to reflect the amounts deducted, only after EAP portions have been calculated for all of the available RESP amounts.
6.2. Understanding EAP Formulas

EAP formulas help to ensure that Promoters withdraw the same proportion from each of the RESP accounts available to the beneficiary for an EAP.
6.2.1. When the RESP has Accumulated Income

When Promoters make an EAP, they must take the same proportion from each of the RESP accounts available for the beneficiary taking the EAP. For example, when there are accumulated earnings, the EAP formula (see 6.1.3) for the CESG amount is:

(A x F) / (C - D - E)

You could rearrange this formula into a [proportion] x [account balance] format where the [proportion] is the same amount for all available accounts:

A / (C - D - E) x F
[proportion] x [account balance]

Where:

A: is the amount of the EAP

C: is the fair market value of the property held in connection with the RESP, determined immediately before the EAP is made

D: is the total of all contributions made to the RESP before the EAP is made that have not been withdrawn

E: is the total in all CLB Accounts of the other beneficiaries under the RESP immediately before the EAP is made

F: is the balance in the CESG Account of the RESP immediately before the EAP is made

The same proportion is taken from all available RESP accounts in an EAP.

Proportion to withdraw when there is accumulated income

When there is accumulated income, the proportion to withdraw from each available RESP account is equal to "A / (C - D - E)".

"(C - D - E)" is the result of taking contributions and the CLB of the other beneficiaries from the fair market value. In other words, this expression represents the amount available to a particular beneficiary for an EAP.

Maximum EAP amount when there is accumulated income

When there is accumulated income in the plan, the maximum EAP amount available to a particular beneficiary is equal to "(C - D - E)".

I really really really appreciate everyone's input - I think I'm becoming a little too obsessed with this particular problem


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## Four Pillars

ecs.780 said:


> I am still confused about how the EAP payment is split up between CESG and Alberta Grant (for us) and Earned Income. When I phoned HRSDC RESP department they indicated that I had to keep track of grant paid out but that we should be able to tell our FI how much of the EAP is grant. Our FI RESP department told me that the income earned in the account was not part of the EAP at all and was capital withdrawl. Unfortunately I seem to get a different answer with each person I talk to. I did find an RESP guide for providers on HRSDC's website(below) and found out how they calculated the EAP - but nowhere does it mention how to ensure grant is not overpaid. They use a total balance of CESG to calculate what gets taken - in our case it will be $21,600 ($7,200 x 3 children) and use a % each year - but this means my oldest will automatically have more taken from grant portion (because the "balance" is starting at 21,600 - not 7,200).
> 
> http://www.hrsdc.gc.ca/eng/jobs/student/promoters/user_guide/section3.shtml
> 
> Appreciate it if there is anyone out there who feels like reading through that for fun and adding any insights they might have What really bugs me is not knowing - and not being able to find the answer. Thanks in advance!


I'm not 100% clear what your question is - does this article help?

http://www.moneysmartsblog.com/resp-withdrawals-family-plan-account-overpay-grants-beneficiary/

Also - neither answer you received is correct. Hopefully mine is. 

When you make a withdrawal, you can request that the money comes from the contribution portion or the non-contribution portion (or some combination of both), but you can't request a specific amount of grant. The grant money gets paid out pro-rated in any non-contribution withdrawal. I discuss in that article how to make sure you don't take too much grant for any one beneficiary.

Offhand I can't remember what the sharing rules are for the ACES grant. I know you can share the grant with a sibling, but I'm not sure if there is a limit per beneficiary like there is with CESG. If there is no limit of ACES grant that a beneficiary can receive, then you don't have to worry about the ACES grant on withdrawal - just don't overpay the CESG.


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## ecs.780

Four Pillars: Thanks for your help - your article is actually what got me all worried about this - so technically this obsession is your fault:rolleyes2: Just kidding!)

From your article:

"How to avoid overpaying RESP grants to a beneficiary

Every time you make an Educational Assistance Payment to a child, proof of enrolment has to be provided to the financial institution. At that time you should ask the following questions:

How much grant money has been paid to the beneficiary so far?
How much grant money will be included in the withdrawal I’m about to request?

If the total of those two amounts is $7,200 or less, you may proceed. If not, you’ll have to lower the EAP amount."

I guess what I'm concerned about is if the account grows substantially we could be in a situation where we have to lower an EAP payment (so we don't over take grant) and take contribution payments instead _even though there is still lots of earned income remaining in the account_. Eventually if there is a balance in this account (earned income portion ) and we will have to pay tax on it (at the end or transfer to RRSP). That seems unfair IF we had to take contributions along the way. 

If this is the case - we are better off stopping contributions into RESP, after maximum grants received, and putting the money instead into another account for them where we are not taxed an extra 20% - maybe?

I agree with you on the Alberta grant withdrawal - I haven't seen a restriction anywhere on that (other than it can only be shared between siblings). So it's really just the CESG part.

Clear as mud?


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## Sampson

Echo said:


> It should be fairly easy to keep track of the ACES grant portion:
> 
> "The ACES Plan will contribute *$500* into the Registered Education Savings Plan (RESP) of every child born to Alberta residents in 2005 and later. As well, *grants of $100* are available to children of Alberta residents *when they turn 8, 11 and 14* in 2005 and later, provided that the children are attending school."


Alberta grant has been nixed.

http://eae.alberta.ca/funding/aces.aspx
http://eae.alberta.ca/ministry/budget2013.aspx


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## billiam

Here is the Scotia itrade withdrawl form that shows you how withdrawls are made. EAP request cannot be requested for Income & Grant amounts seperately per page #2. As for the formula itself I believe it reduces the grant portion already received from each additional request causing the income portion alloction of the request to be increased. The total request is only reduced when income remaining is less than amount requested. Perhaps to satisfy your self work through the calculation using some figures to see how it plays out.

http://www.scotiabank.com/itrade/en/files/12/03/etca_EAP_request.pdf


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## Four Pillars

ecs.780 said:


> I guess what I'm concerned about is if the account grows substantially we could be in a situation where we have to lower an EAP payment (so we don't over take grant) and take contribution payments instead _even though there is still lots of earned income remaining in the account_. Eventually if there is a balance in this account (earned income portion ) and we will have to pay tax on it (at the end or transfer to RRSP). That seems unfair IF we had to take contributions along the way.
> 
> If this is the case - we are better off stopping contributions into RESP, after maximum grants received, and putting the money instead into another account for them where we are not taxed an extra 20% - maybe?


I think you are over-complicating things a bit. If you read my 8 things to know article again, I explain how to not get stuck with the 20% penalty at the end. With RESPs you don't have the option of making EAPs to just one child in a family account and keeping all the grant.

I suggest you continue to contribute to the RESP and just manage the withdrawals so as to not overpay on grants to any one beneficiary. That's all you need to do.


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## Echo

Sampson said:


> Alberta grant has been nixed.
> 
> http://eae.alberta.ca/funding/aces.aspx
> http://eae.alberta.ca/ministry/budget2013.aspx


Oh snap!


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## ecs.780

Thanks for everyone's response. I think I am over thinking it - and knowing the government the rules will probably change anyway. thanks


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## cashinstinct

GoldStone said:


> I'm the one with a $52K RESP. Who said my kid will get all of it?
> 
> If you are smart about withdrawals, you can get all your contributions back. Only the grant plus the growth amount will be used on education.
> 
> One more time...
> 
> *20% return guaranteed*


That's exactly how I see it.

Capital is mine, depending on the choices of my children regarding their post-high school education and how they manage their finances / how serious they are / etc... I will see how much capital they will get time due.

For now, I will open RESP this year for my 1st child coming up this October and I plan to contribute $2500 per year for the free money (20% federal, 10% Quebec).

What will happen with the capital? Who knows


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## kcowan

My first grandchild is getting her first (of 4) $10k this year, and $1800 comes from the EAP side so that in four years, she will get $7200. Repeat 2 years and 4 years for the next two GC and then contribute the $5000 for my last two GCs until number 3 gets their first amount in 2027 and the final one starts 2 years later.


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## nobleea

Sampson said:


> Alberta grant has been nixed.
> 
> http://eae.alberta.ca/funding/aces.aspx
> http://eae.alberta.ca/ministry/budget2013.aspx


The grant is still in operation. Our daughter was born in March and she has the initial $500 grant in her RESP. I doubt she'll get the grants at 8, 11, and 14 though.


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## fraser

Just starting one from my grandson. If he has a brother or sister, the plan can be converted to a family plan.

Agree, where else can we get an immediate 20 percent plus the earned income is not taxable. It is a no brainer...but watch the management fees!


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## lonewolf

Four Pillars said:


> I'm letting the grandparents max out the contributions.


 Unless grandparents have fully funded their retirements they should be the last person on the list for covering the cost of education. The first person on the list for paying cost of education are the kids going to school. These government programs produce a bunch of kids that do not know how to be responsible for themselves. Grandparents, parents & kids need to stop being wimps & do the right thing & not put the burden on the elderly.


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## gibor365

ecs.780 said:


> I hope someone can help please - I read these boards a lot but very rarely post I was recently trying to discover how the EAP payments for RESP's are calculated. We are in a very fortunate situation - 3 kids (6, 9 & 11) and due to grandparent contributions and good market returns the kids RESP is already over $200k. If we keep contributing all grant money will be received in the year each child turns 14. My question is the way the account in growing there will be more than enough for all 3 to go to school with money left over. Obviously contributions can come out no tax consequences, but I want to know how I can be assured that the grant money paid out does not go over the $7200/ child - because the earnings portion will be substantial. Does anyone know if when requesting an EAP if you can specify how much comes from the CESG grant and how much comes from earnings? I hope I have explained myself well enough Thanks!


From what I understand Capital gain is included into EAP, but not included in CESG . The limit on CESG is 7,200 per child. When I was doing redemption for my son (and I have family Term RESP for both kids, family my son MF RESP and family my daughter MF RSEP) , I specified what redemption code I want PSE or EAP and that it should be applied for my son (EAP portion). The problem that no one in TD Canada Trust (include back-end office where they called) couldn't give me answer what will be CESG amount on any EAP withdrawal .... thus you should be careful not to exceed 7,200 limit. In my example, I did withdrawal of 5,000 and week later got letter that CESG portion was 2569.46
2nd time I asked rep how much I can take not to exceed 7,200 and no one could give me answer, so I did withdrawal of 8,074 and week later got letter that CESG portion was 3,578.82. Now total CESG for my son is 6,148.28 and I have no idea how much I can withdraw more in order to exceed 7,200 
But the major point I don't get.... why I just can't tell to withdraw all as PSE (hence I don't need to pay tax on this withdrawal)


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## gibor365

It's very unclear regarding CESG $7,200 rule..... From 2007 basic contribution is $2,500 and grant $500. My daughter was born in 2001, thus for 2001-2006 (6 years), 
she got 20% of $2,000 * 6 years -> 2,400 in grant, we can contribute until she is 17 (included) , so 20% of $2,500 * 11 years = $5,500 grant. Thus total grant she gonna get is 2,400 + 5,500 = $7,900 that will exceed $7,200 limit.
Every kid born after 2001 will be in even worse situation. Can any one explaint it to me?


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## kcowan

I have the benefit of 5 GCs and for the first one, I specified EAP for $1800 for the first of four years. TD then provided a letter showing how much was CESG. So each year I will increase the EAP portion until I approach the limit without going over. I agree that it is screwy. I will do the same with each successive GC. I have a spreadsheet for drawing down that forecasts withdrawals and remainders. The only wild card is the earnings for the RESP.

BTW I asked TD for a breakdown ahead of time.


> RESP Notional Breakdown:
> Available EAP : $
> Grant $
> 
> Available PSE : $
> 
> 1. This is an approx. amount based on yesterday's market value. Income amount may be fluctuate at the time of the withdraw request is processed.
> 2. As TD Waterhouse offers only family plan RESPs, totals for withdrawal are shared between beneficiaries and are not available on a per beneficiary basis


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## Ihatetaxes

I just put $2,500 per kid the month of their birth and then the first week of every January and have recorded all my contribution dates and the dates the grants come into the account. Seems straightforward so far. Total contributions of $35,000 and total grants of $7,000.


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## kcowan

Tracking the inputs is easy. It is forecasting the CESG upon withdrawal to stay below $7200 per child that is tricky. Its share of EAP will be a function of the overall earnings in the RESP.


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## fraser

Good info, was not aware of the cap. Just started a RESP for a grandson. Looked at a few funds but many seemed to very much 'downplay' the fee side. Ended up with our advisor firm they also only do family plans-which is fine. 

It will be a long time until this funds are withdrawn and I realize that the rules could change. But are there rules on how the money has to be withdrawn or itemized on withdrawal since it would make more sense to draw down the grant monies first, followed by the sheltered earnings.


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## kcowan

and if you are not careful about withdrawals, the remaining proceeds will be taxable unless you have RRSP contribution room.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns409-485/418-eng.html


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## gibor365

kcowan said:


> Tracking the inputs is easy. It is forecasting the CESG upon withdrawal to stay below $7200 per child that is tricky. Its share of EAP will be a function of the overall earnings in the RESP.


Exactly! It's even much more complicated when you have Mutual fund RESPs and Term RESPs for more than 1 child.
Depends on the market performance, portion of CESG within EAP will always change.
I spend several hours checking old statement and printouts from TD.
Thus:
1st withdrawal from EAP (jul 13): 8,074 , CESG portion happened to be $3,578.82 -> 44%
2nd withdrawal from EAP (dec 13): 5,000 , CESG portion happened to be $2,569.46 -> 51%
Total CESG my son from government is $6,600 .
SO CESG left to take out is $451.72 and I have no idea (as well as TD reps) how much I need to submit EAP redemption to get exact CESG amount.
Probably in my case it's a little flexible, because even though I got only 6,600 in grants, I can withdraw up to 7,200? Not sure....

In case of my 2nd child is even more confusing,
Until 2007 , contibution limit was $2000 and she was getting grant $400/year -> $2,400
from 2007, limit is 2500 ($500 in grant) , if we continue to max contrib until she is 17 , total CESG will be 7,900 (that exceeds 7,200 limit).
So, maybe I need to witdraw more CESG for my 1st child OR just stop contribution to my 2nd child when she is 15?

P.S> Out government is so big expert to make product so complicated, that even financial institution doesn't really understand it 
P.P.S. I read in one globe and mail article that when you asking for RESP redemption without specifying redemption code, defaulted code is EAP and you can get really in big trouble if you have family plan


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