Tool RESP

 

Tool: To monitor your RESP 




A simple tool to monitor your Registered Education Saving Plan (RESP). 

To access the file, clic the links above to access the Excel file without macro. The goal of the tool is to monitor the RESP and its withdrawal. 

See at the end for more information on how to use the tool.

Analysis:

Contributing to a RESP for your children is a great idea. You will receive from the federal a match of (20%) and from Quebec/Saskatchewan (10%) and $1,200 at opening if you are from British-Columbia. The contributions are not tax deductible, but you don't pay taxes when you withdraw them. The returns on them and the match are taxable on withdraw on the child taxes.  

Ideally, the student gains a little income and can withdraw tax free. However, if the child is over the first taxable bracket of about $16k-$19k, we get tax over 26%+ (in Quebec). It eliminate the match advantage. The year the student graduates, a half year of earnings at $60k means that the RESP withdrawal during that year are going to be taxed at 36% (in Quebec)!

In brief, we must monitor it to minimize the taxes.    

Conclusion: 

  • If you contribute only a few year at the maximum, you should not have any issue. 
  • If you are maximizing your contributions to get the match, 36,000$ worth of contributions. It can risk to be problematic if your child only make 1 or 2 years of study. If your child study for 5 years, it should be ok, but you must start withdrawing as soon as possible. Here`s a table of the balance at 18 years old if you had contributed to the max with a match of $36k.  

  • The taxable bracket are increasing by the general inflation. Thus we can consider that the first bracket will remain close to $16k-$19k in today`s dollar. Let`s consider the balance at 18 in today`s dollar as well. 
  • We can withdraw our contribution tax free, $36k. At 7% return, we are left $33k to withdraw. In 2-3 years, we should be able to liquidate the remaining without too much taxes.  
  • However, at 10% return, we would face over $60k to withdraw. We are talking about at least 4 years to withdraw the amount without taxes. Just a BAC of 3 years would be insuffisant to withdraw all without taxes. 

How to use the tool: 

  • Save the file on your computer.
  • Go to the EN tab and modify the input items in green. Be at ease to replace the beginning balance, but that will break the prior links.  
  • I had to use the "Data/Group" functions.  You can clic on the +/- on the side of the file to expend or hide some rows or columns.  

Tab:

  • FR : Main tab. 
  • Rules :  Knowledge on the RESP
  • Hypothèse : Reference on the assumptions. you can update them in the green input. 


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