RESP Questions

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
tedster
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Re: RESP Questions

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My son and his kids liv in Toronto. All I do is trade. Webbroker is TD's on-line discount trading vehicle. I am not certain what you mean by CLB.
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Re: RESP Questions

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tedster wrote:My son and his kids liv in Toronto. All I do is trade. Webbroker is TD's on-line discount trading vehicle. I am not certain what you mean by CLB.
So QESI doesn't apply for him but it does for me.

I didn't know TDWH's interface was called webbroker, I guess I learned something. Does every discount broker give the web page a fancy name?

CLB is for low income families. I've already got $500 and will expect another $100 for 2012.

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tedster
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Re: RESP Questions

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newguy wrote
. Does every discount broker give the web page a fancy name
I deal with CIBC and theirs is called Investors Edge.
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Re: RESP Questions

Post by tedster »

I believe that Ontario deposits $33.40 per child per month. At least I think it is the Province.
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Re: RESP Questions

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newguy wrote:So I tried to put money into the RESP today but BMO online will only let me buy mutual funds. All of the RESP is in a savings account right now. I trot over to the bank and ask them to transfer the money but they say no. I have to make an appointment to see an adviser if I want to put money in a savings account. :?: :twisted:

The money market mutual fund has >1% mer but it is available, coincidence?

newguy
Open the RESP account with BMO Investorline rather than BMO banking. I have an RESP with BMOIL and can invest it with anything I want.
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Re: RESP Questions

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My son and his ex have it set up so that their contributions go automatically into the webbroker account. As does the Gov't contribution. I do the trades but can not take mony out nor (more important) put it in. :) I can though, move stocks and money around.
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Re: RESP Questions

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westinvest wrote:Open the RESP account with BMO Investorline rather than BMO banking. I have an RESP with BMOIL and can invest it with anything I want.
I will once the savings from buying etfs beats the annual fees + commissions. I suspect the same is true of every bank vs it's discount brokerage.

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Re: RESP Questions

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tedster wrote:My son and his kids liv in Toronto. All I do is trade. Webbroker is TD's on-line discount trading vehicle. I am not certain what you mean by CLB.
CLB is the Canada Learning Bond.
http://www.servicecanada.gc.ca/eng/goc/clb.shtml
from the link
The Canada Learning Bond (CLB) is $500 offered by the Government of Canada to help start saving now for your child’s education after high school.

Plus, your child could get $100 every year until the child turns 15 years old to a maximum of $2,000!

Eligibility Information
•The child's family must receive the National Child Benefit Supplement.
Children must meet the following criteria:

•have been born after December 31, 2003
•have a birth certificate
•have a Social Insurance Number (SIN)
•be a beneficiary under an RESP
•reside in Canada

Cheers
J
tedster
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Re: RESP Questions

Post by tedster »

Thanks I will pass that on to my son.
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RESP Withdrawal Question

Post by Descartes »

Hi,

situation is:
I have a family RESP funding 4 kids. I am preparing to make the first withdrawal for the coming school year.
We've only received the basic CESG for each child. I've, of course, kept track of the total CESG and contribution for each child.

Now, I understand that a withdrawal will be composed of an EAP portion (CESG + accumulated income) and a subscriber-contribution portion.
I also understand that institutions default to 100% EAP to help the subscriber get rid of the taxable RESP amount as soon as possible and that the ratio between the portions can be changed by me as desired for each withdrawal.

What I am not clear on is the formula used to determine the maximum permitted EAP for a given withdrawal for a given child.
I would need to know this so that I don't mistakenly exceed the CESG awarded each child in determining the ratio of EAP versus contribution for the coming withdrawals.

I could make a logical guess or scan through the myriad government web-pages, but I would like a more reliable answer through a lazier process:
Would one of those who have trodden this path before me please help?

Thanks very much for any responses.
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adrian2
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Re: RESP Questions

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This old post of mine might help in determining the split CESG / "current growth" for each EAP.
Note that in my case, each RESP was for an individual child.
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Re: RESP Questions

Post by kcowan »

I am also doing the same thing for the first of five GCs. After screwing around with the spreadsheet, I finally decided to give them $1800 each for four years, and the rest out of the PCE each year. This does 2 things. It does not penalize the child for being extra good and earning scholarships since the EAP is taxable income. Sure maybe she will earn less next year. But I can't predict that. I hope she will earn more.

So every one of the 5 GCs will get the same treatment: $1800 per year taxable and the rest return of capital. I spent several hours with my RESP spreadsheet to finally come to this conclusion.

(BTW don't expect any help from your broker. They are all too young to have any personal experience.)

(PS I am glad that I contributed the maximum each year. It provides some nice flexibility at this stage.)
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Re: RESP Questions

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My son bought a book from Amazon by Mike Holman on RESPs. He paid $5.99. In it Mike says that once a child has enrolled in University and before December 31 of the year in which they turn 18, you can make an extra large contribution and the Government will immediately contribute 20% the following month. You can withdraw the contribution at anytime. He says, eg. In December you contribute $5000.00 and in January the government adds $1000.00 You just have to be certain that you do not exceed the maximum Government contribution. Anyhow, I am just passing it on.
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adrian2
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Re: RESP Questions

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tedster wrote:Anyhow, I am just passing it on.
Very incomplete and potentially incorrect information, depending on the circumstances.

See finiki for the real deal.
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tedster
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Re: RESP Questions

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adrian2 wrote

Reply with quote
tedster wrote:

Anyhow, I am just passing it on.

Very incomplete and potentially incorrect information, depending on the circumstances.
I never claimed that it was anything except hearsay. Perhaps instead of this "disparaging remark" you could clarify and say under which circumstances it would be okay?
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Descartes
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Re: RESP Questions

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Thanks - the example from Adrian is great for a single child plan but, as you know, the addition of other children in the plan with their own CESG amounts complicates the calculation.

The main question for me that remains open even after browsing through the government pages:
"Is the current growth in the plan "distributed" to each child proportional to the total CESG provided to that child for the sake of the calculation or is the current growth just one big communal pool for the sake of the calculation?"

The amount of the CESG remaining after a withdrawal of EAP can be very different depending on the answer.

Since I intend to be 100% EAP for the first withdrawal anyway, I've decided to just figure out the formula used by observing how they do it after the first withdrawal since the government explains..
When a student receives an Educational Assistance Payment, he or she will also receive a notice detailing the amount of Canada Education Savings Grants in the payment received. It is the student’s responsibility to keep track of the amount of Canada Education Savings Grant money received; beneficiaries must repay any amount over the $7,200 limit.
I will post here what I learn should others want to know.


...By the way, it has been stated many times that no receipts or explanation of expenses is needed but I found the following statement a little contradictory. I wonder if policies have been adjusted recently..
To withdraw money from an RESP, contact your RESP provider. They will ask to see official proof of enrollment before issuing the Educational Assistance Payment. They may also provide you with a list of allowable expenses that the money can be used for, or they may ask for receipts for school purchases to prove the money is being spent on allowable educational expenses.

Because they are responsible for administering the RESP in accordance with the Income Tax Act, your RESP provider determines what is considered a “reasonable” expense (i.e. one that can be paid for with the savings). Any expense that is in accordance with the Act and the terms of the plan would be considered reasonable.
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adrian2
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Re: RESP Questions

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tedster wrote:I never claimed that it was anything except hearsay. Perhaps instead of this "disparaging remark" you could clarify and say under which circumstances it would be okay?
Read the finiki article. Your hearsay is comparable to advising a random guy you met "I just read a book, it says if you open an RRSP, you'll be getting free money from the government".
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Re: RESP Questions

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Descartes wrote:The main question for me that remains open even after browsing through the government pages:
"Is the current growth in the plan "distributed" to each child proportional to the total CESG provided to that child for the sake of the calculation or is the current growth just one big communal pool for the sake of the calculation?"
My bet is that the current growth is a big communal pot.
Descartes wrote:Since I intend to be 100% EAP for the first withdrawal anyway, I've decided to just figure out the formula used by observing how they do it after the first withdrawal
That is my advice, too. I remember that after each EAP withdrawal I've done, there was a printed blob on the confirmation stating how much CESG is left in the plan. In your case, with multiple children, it should state how much CESG is left for the individual child receiving the EAP.
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Re: RESP Questions

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With all these calculations complications, it makes me wonder sometimes if I would be better off opening 1 RESP account per child only for simplicity purposes.

(Currently have no children, first one on the way).

With Questrade free RESP and free ETF purchases... I heard mixed reviews about Questrade though.
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Re: RESP Questions

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cashinstinct wrote:With all these calculations complications, it makes me wonder sometimes if I would be better off opening 1 RESP account per child only for simplicity purposes.
I wouldn't be put off by it. It is just a matter of learning how it is done and making a note of it.
The main benefit of the family plan for me is the "economies of scale". I can pool the contributions, CESGs, and investment income together to make fewer and larger (and hence less costly) market decisions.
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Re: RESP Questions

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cashinstinct wrote
With all these calculations complications, it makes me wonder sometimes if I would be better off opening 1 RESP account per child only for simplicity purposes.
My son and his wife have two children. They were advised to open 1 RESP. Years later they have had an ugly divorce. Theoretically one parent could clean the whole thing out. It would seem that one RESP per child per parent would avoid any possible problems years later.
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Re: RESP Questions

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tedster wrote:cashinstinct wrote
With all these calculations complications, it makes me wonder sometimes if I would be better off opening 1 RESP account per child only for simplicity purposes.
My son and his wife have two children. They were advised to open 1 RESP. Years later they have had an ugly divorce. Theoretically one parent could clean the whole thing out. It would seem that one RESP per child per parent would avoid any possible problems years later.
That's not correct. The "other" parent can make a contribution at any time and become the subscriber of the RESP. One day later, he / she can clean it up.
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Re: RESP Questions

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adrian2 wrote
That's not correct. The "other" parent can make a contribution at any time and become the subscriber of the RESP. One day later, he / she can clean it up.
I assume you mean "Clean it out"? Of course, they would have to know the bank, the RESP account, and the child? You are really always on my back? What have I ever done to you? or are you having a bad day? :roll:
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Re: RESP Questions

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From Mike Holman’s book
Despite Adrian2’s constant disparagement of my “hear-say” (and my way of citing) I have copied the photos of the pages from my son’ purchase of Mike Holman’s book on Kindle. I do not have a Kindle. http://www.moneysmartsblog.com/resp-boo ... canadians/ I apologize that some of the words are illegible however I have identified them as such.
I am pretty certain that the extract below is an accurate copy.

“How to Make a Guaranteed 20% Return in your RESP

Topics covered in this chapter.
*Last minute contribution for 20% gain

Have you ever seen one of those ads promoting big investment returns if you subscribe to a stock tip newsletter or sign up for an expensive trading course? Well, have I got a deal for you!

This investment tip is guaranteed to give you a 20% return with a maximum time frame of two months. Unfortunately, most people won’t be able to to take advantage of it right now, but if you have an RESP account.. keep it in mind for the future.

Here is the tip:

Maximize your RESP contributions while your child is attending school and already making withdrawlas.

How it works.

Your child turned 17 this year and just started University. You withdrew money from the RESP tp pay for their first semester. In mid-December you get a bonus from work and contribute as much as you can to the RESP. The 20% grant based on the contribution will arrive at the end of January and can be withdrawn immediately.
*Total time of investment – 6 weeks.
*Total return – 20% (or more if you are eligible for additional RESP grants based on income)

Why is this any different than any other RESP contribution?

Because the child is already enrolled in school and there will be almost no doubt that you can withdraw the money without penalty. Most RESP contributions are made before the child starts school, and it is not guaranteed that you will be able to keep the grant and make proper educational withdrawals since they may not attend post-secondary education.

The other difference is that you’ll be able to make the withdrawal as soon as the grant has been placed into the RESP account, which should happen within two months of the contribution. Not only is the 20% guaranteed, it’s also very fast.

Are you allowed to contribute to an RESP after a withdrawal has been made?

Yes, you are.

Who can do this?

The guaranteed investment option is not avalable to everyone. Here are the necessary conditions:

*Child has to be enrolled in an eligible post-secondary educational institution.
*Contributions have to be made by the end of the year in which the child turns 17.
*Child has to be eligible for RESP grants as a (illegible)17 year old.
*Maximum lifetime grant limit of $7,200 has not been reached. Call the HRSDC at 1-888-5624 (may be incorrect due to illegibility)
*Annual grant limit of $500 ($1,000 if carrying over a year) has not been exceeded.

What if the student doesn’t need to any more money?

Do it anyway. You don’t have to show receipts with making an RESP withdrawal. Make the contribution, get the 20% grant and then use it for some extra tutoring or beer.

I don’t have any cash. Should I borrow money to do this?

If you can borrow money at a reasonable rate and can get a decent sized RESP grant, then this is one-time that borrowing to contribute into an RESP is a good idea.

For example: Let’s say you borrow $5,000 in early December at 7%, contribute the money to an RESP, get the $1,000 grant at the end of January and withdraw immediately.

You total interest charges will be around $60, and you will have an extra $1,000 inside your RESP account. That is a pretty good deal.”
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Re: RESP Questions

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tedster wrote:How to Make a Guaranteed 20% Return in your RESP
[...]
The guaranteed investment option is not avalable to everyone. Here are the necessary conditions:”
... and more implied fine print which is explained in finiki.

Inter alia:
* if the beneficiary is 16 or 17 years old, one of the following two conditions must be met:
A minimum of $100 in annual RESP contributions has been made in each of any four years (consecutive or not and not withdrawn) before the end of the calendar year the beneficiary turned 15, OR
A minimum of $2,000 in RESP contributions has been made (and not withdrawn) before the end of the calendar year the beneficiary turned 15.

A bit more than your post "once a child has enrolled in University and before December 31 of the year in which they turn 18, you can make an extra large contribution and the Government will immediately contribute 20% the following month."

Also, the maximum annual CESG grant is currently $1,000, corresponding to a contribution of $5,000.
In my mind at least, "an extra large contribution" can be interpreted as more than $5,000, in light of the fact that the overall maximum RESP contribution is $50,000.
Your child turned 17 this year and just started University.
Really?
How many cases like that have you heard of, for this scenario to be applicable?
How many of those were unaware of the RESP concept?
Once again, your post stated "once a child has enrolled in University and before December 31 of the year in which they turn 18" --> in fact, in the book you've read it states that the child must be 17 in the year she starts university. Not 17 in the fall and turn 18 later in the calendar year, she has to turn 17 in that calendar year. Big difference for a child to turn 17 in that year vs. your quote of "turn 18".
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