Happy Thanksgiving!!!
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Happy Thanksgiving!
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@Smacky , or anyone else - have you started the withdrawal from RESPs for your children?
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Yes, Iâve done two. What do you want to know?
Buckle up, itâs gonna be a long one.
OK!
RESPs - RESPs for the children was always a point of contention, with me wanting those sweet government grants and husband feeling like we should be prioritizing TFSAs. I persevered, and the children each had $36,000 deposited by us by their 14th birthdays, which was done strategically in the âcatch upâ years so that we got the maximum grant of $7200 each.
So that means, our principal deposit was a total of $72000.
Our grants are a total of $14400
And at this moment in time, our interest earned is $60,975
We subscribe to the theory that the RESP belongs to us, not the children, and it is our choice as to when we distribute funds to the children, and in what amount. Leftover RESP reverts to the parents.
In September, when J1 started college, i initiated the $8000 withdrawal that one can make in the first 13 weeks of school, from the EAP portion (Interest + grants).
Question 1: The first 13 weeks of school ends in early December, the 8th I think? Do I have to wait for second semester to start to withdraw more EAP money, or can I withdraw in the 2026 Tax year.
J1 had a T4 job earning them about $5500 this summer, plus the 8000, put them at an income of $13500 for the year so far. J1 also has tuition deductions, and DTC
Question 2 Am I better off to keep J1âs income for 2026 below the Basic Personal Amount of $16452, and transferring the tuition and DTC credit to us, OR, do I leave them with J1, and withdraw (assuming that the answer to question 1 is that I can take more money out this year) uh - more. (letâs see the DTC base amount is $10,341. I am not sure how tuition credits work) - I think that increases J1âs BPA to $26,793. so, $26793-$8000-$5500 = ~$13000.
Question 2a I think that means in mid December, I can take out 13000 of EAP credits?
Now, onto the principal. I know that the reading generally says take out the EAP money first - but well, we are going to be earning more EAP money (in theory) on the interest from the principal no? A few months ago we made a $25,000 withdrawal from Prospâs TFSA to give to Chuck for a down payment.
Question 3 - Now that I have activated the withdrawal process on the RESP, in January, can I remove principal? I mean, we(or one of the children) have to pay taxes on the eap portion, whereas, we donât pay taxes on the interest in a TFSA. I feel like that is a better vehicle, especially with the $25,000 in available room on Jan 1, plus 2027 allottment?
Question 4 - If i wanted to - could I pull the whole principal? I am not worried about holding money for J2 - because we can draw that our of our TFSAâs if it is a more tax advantaged vehicle.
(I feel like although @plainjane doesnât have children and therefore no RESP, and @Cereal has children too young to worry about this yet, that they probably have valuable insight).
I have more questions, but they do depend on these answers, so I think we will leave it here for now
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I believe you can withdraw the full principal at any time now, but it may confuse the bank. It was also post tax money so should not be taxed. When I was working at a financial institution I believe we had a form, and also you needed to write principal only (like contributing to a mortgage when you make a principal only payment).
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The principal is post tax, and will not be taxed
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Yep! I am ignoring all EAP questions because the rules on those have changed since I understood it
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Also, I am pretty sure I know my path, but I am afraid I am missing something or have misinterpreted something
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Your questions are more advanced than I can be helpful with, sorry
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MMM or Reddit for help?
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I find another parallel! I worked for CIBC through university / start of college as a teller. (But was completely hands off on RESPs, if you needed to do anything with that, you needed an appointment to see an advisor)
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I did look at Reddit, and didnât find much that was helpful. I may ask Prosp to post on MMM looking for input
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Copilot agrees with my strategy, but, I know that copilot can be Confidently Wrong.
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I agree with yours too but I am not an optimizer. Our default answers were to protect the money for the student/earn them more.
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I also feel that it may be more beneficial to the student to remove principal to put the annual allotment into their TFSA once they are 18, rather than leave it put.
If thatâs the strategy one is using, preserving the funds for the student
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Agree! But the whole system bar grants is largely based on people being bad with money. Like in a TFSA the student might spend it.
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We just took out about $25,000 from Prospâs TFSA to give to Chuck - that was always planned money to go to her (it was the remains of her RESP plus child support form her mom).
The reason we kept it was so that she couldnât spend it - but even now, at almost 30, itâs Prosp who has the password, not Chuck (mutual choice) so that she canât get into it unless she asks. (She and partner are in the process of BUYING A HOUSE! and she has asked for funds towards the deposit and down payment, which was happily given)
Iâm thinking for the younger two, we might be better off putting $7000 (or the annual allotment, I think itâs supposed to go up to $7500 in January) in at 18, 19, 20, and then we arenât taking up our own space to hold cash for them, and itâll be about equal
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OH! And - I didnât use the FHSA, cause it is new, but if one opened one of those for their child, thatâs another $8000 of tax sheltered room that they cuold access
(And - I think it acts as an RRSP, in terms of deduction? I wonder if I can increase J1âs EAP payout by putting it into a FHSA for them)
Really, I think I just donât want to have to muck about with the RESP rules, and if I have other sheltered vehicles available, perhaps I use those
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