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  1. #41
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    Quote Originally Posted by kenny View Post
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    If you just want to max the grant money it's just $2500/year since its 20% grant ($500).

    If you want to hit max lifetime contribution, get all the grant money and have max potential growth for RESP you should invest $15000 when opening it, then $2500/year for the next 14 years.
    Quote Originally Posted by dezmarez View Post
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    ^^^this is the correct strategy, if you have the means to do it of course.
    So what's the point of going max total vs. max grant money? You can't deduct contributions so if I'm paying over the top of the maximum grant contributions threshold ($36,000) I don't see the benefit. That extra $14K is paid with after tax dollars whether I dump it in my kid's RESP or leave it in my own taxable brokerage account. If it comes out of the RESP my kid has to claim it as income so in essence it's double taxed, once when I earned it and then again when my kid spends it. What am I missing here?
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    Quote Originally Posted by Masked Bandit View Post
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    So what's the point of going max total vs. max grant money? You can't deduct contributions so if I'm paying over the top of the maximum grant contributions threshold ($36,000) I don't see the benefit. That extra $14K is paid with after tax dollars whether I dump it in my kid's RESP or leave it in my own taxable brokerage account. If it comes out of the RESP my kid has to claim it as income so in essence it's double taxed, once when I earned it and then again when my kid spends it. What am I missing here?
    The growth inside is tax free. It’s not as good as RESP. But it’s still better than nothing.
    Originally posted by Thales of Miletus

    If you think I have been trying to present myself as intellectually superior, then you truly are a dimwit.
    Originally posted by Toma
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    Quote Originally Posted by Masked Bandit View Post
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    So what's the point of going max total vs. max grant money? You can't deduct contributions so if I'm paying over the top of the maximum grant contributions threshold ($36,000) I don't see the benefit. That extra $14K is paid with after tax dollars whether I dump it in my kid's RESP or leave it in my own taxable brokerage account. If it comes out of the RESP my kid has to claim it as income so in essence it's double taxed, once when I earned it and then again when my kid spends it. What am I missing here?
    Unless everything else is maxed out (RRSP, TFSA, etc), I don't think maxing out the lifetime RESP contribution makes sense. I only do the $2500/year to maximize the grants.

    I just put that strategy out there for people that want to maximize RESP completely. Front load the contribution to get the most out of it.
    ---

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    Yeah I think for most people, maxing out the grants is a pretty nice start. you put in $2500/yr, get $500, do that for 15 years, make 5% on your investments, and you have ~$65k before they enter university.

    That's not going to cover every dollar for tuition, books, housing, food, travel etc for a big-name foreign university, but it'll handle a good chunk of a 4-year Canadian undergrad degree.
    If my kids end up going to MIT or CalTech or Cambridge or anything, they'd better get some hefty scholarships!
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    The other benefit to maximizing the contribution to $50K is that additional interest earned. When your kid finally goes to school, you have 3 buckets of money in the RESP:

    Contributions: $50,000 (if you contribute the max)
    Grant: $7,200
    Gains: $20,000 (an example)

    So at that point, if you want, you can take your entire $50K out personally and blow it. It is tax free money to you or your kid. The $7,200 grant money, is taxed if your kid takes it out, and if they don't go to school, it is lost. The gains which will obviously be higher if you max out the contributions are taxed to either your kid if they use it, or you if you take it out.

    The biggest negative to maxing out the contribution is if your kid doesn't go, you will end up with a tax bill. But not the end of the world.

    Personally I have been maxing out, with my fingers crossed that the kids won't need everything in there. I am hoping to do something stupid with the leftover money.

    Also, at this point my wife and I haven't even decided how much we are giving our kids (and technically we don't know if either will go to post-secondary school at this point). But we are still going to make sure the fund is as high as possible to give us more options.

    And my biggest advice is to start maxing out asap. We didn't as I wasn't aware (to lazy to actually look into details at the time) that your contributions could come back to you so we started small thinking "well my parents didn't give me anything, I don't want to spoil mine". But max out. You can always decide if you like your kid or not later.

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    Also, kid doesn't need to be in a bachelors degree to qualify. Many types of schooling qualify, I have a niece who went to esthetics school and use her RESP for that. Weirdly, she's turned that training into a pretty reasonable career path. I did not see that coming.
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    If you can contribute and invest fully for the first 14.5 years to take advantage of the grant, that's a really solid foundation to get them on their way. They can work part time to supplement. If you guys recall the sober fragments between the binge drinking, it wasn't hard to balance school with a job.

    I've actually been thinking about the exit strategy as I feel there are ways to launder money back to the parents. First, as long as your kid is enrolled for more than 13 months, they can withdraw the entire amount for whatever that is related for school. Second, if they don't go to school there is no tax bill. It can be kept in RESP for 36 more years if they need to use it, or transferred to your own RRSP tax free.

    https://www.canada.ca/en/services/be...sp/use.html#h1

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    Buy a property, stick the kid in it, kid pays rent, you give money from RESP to kid to pay rent.

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    Quote Originally Posted by suntan View Post
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    Buy a property, stick the kid in it, kid pays rent, you give money from RESP to kid to pay rent.
    That sounds like something a Kushner would do. Brilliant!

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    Quote Originally Posted by suntan View Post
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    Buy a property, stick the kid in it, kid pays rent, you give money from RESP to kid to pay rent.
    Is this not everyone's plan???
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    Quote Originally Posted by Masked Bandit View Post
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    Is this not everyone's plan???
    Not having the kid in the first place definitely makes more sense
    Originally posted by Thales of Miletus

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    Quote Originally Posted by Masked Bandit View Post
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    So what's the point of going max total vs. max grant money? You can't deduct contributions so if I'm paying over the top of the maximum grant contributions threshold ($36,000) I don't see the benefit. That extra $14K is paid with after tax dollars whether I dump it in my kid's RESP or leave it in my own taxable brokerage account. If it comes out of the RESP my kid has to claim it as income so in essence it's double taxed, once when I earned it and then again when my kid spends it. What am I missing here?

    Only accumulated income and grant money is taxed. Your after tax contributions aren’t taxed when they are withdrawn.

    Think of the accumulated income as a form of income splitting with your child, as the growth will be taxed in your child’s hands, who in theory, would be in a lower marginal tax rate than the parents.
    These opinions are entirely my own and do not represent any other person or organization.

  13. #53
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    Quote Originally Posted by dezmarez View Post
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    Only accumulated income and grant money is taxed. Your after tax contributions aren’t taxed when they are withdrawn.

    Think of the accumulated income as a form of income splitting with your child, as the growth will be taxed in your child’s hands, who in theory, would be in a lower marginal tax rate than the parents.
    I see I see said the blind man...who picked up a hammer and saw!

    I didn't realize that it was only the grant & growth money that was taxed, that makes much more sense. Thanks!
    "Masked Bandit is a gateway drug for frugal spending." - Unknown303

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