Making the most of your RESP withdrawals

Financial Planning
Investment Management
Taxation Strategies
The Blueprint

Posted on:

August 13, 2026

Written by:

Gary Leung, CFP. PFP, TEP

Senior Advisor, Financial Planning

“It’s the small, consistent actions that drive the biggest successes. Going that extra mile today paves the way for a better tomorrow.”

My passion for finance started young. I was raised by my grandmother, who didn’t speak English, and as a child, I often found myself translating for her at the bank. In helping her understand the options put forth to her, I found myself not only acting as a translator but as her financial interpreter—decoding “bank speak”. This sparked my love for numbers, problem-solving, and helping others navigate what can often feel like an overwhelming system. That early experience nurtured my desire to make a difference in people’s financial lives.

While my interest in finance has continued to grow, what I truly love most is helping people. For me, financial planning isn’t just about crunching numbers—it’s about understanding each client’s unique story: their dreams, hopes, and goals for the future. Today, I’ve found my purpose in supporting a team of Private Wealth Advisors with preparing, presenting and implementing comprehensive, customized and well-integrated plans for our clients. This includes trust and estate planning and administration, tax planning, philanthropic planning, business succession, and risk management techniques.

Whether it’s a 5-year action plan or 30-year projection, we take the time to analyze our clients’ current financial scenario, then review and implement strategies that can help them achieve their goals. Understanding our clients’ true values helps me support not just their financial needs, but their emotional well-being too.

I began my career in 2014 at BMO as a Financial Services Manager and was promoted to a Financial Planner for high-net-worth clients. In 2023, I joined the firm as a Senior Planner. My professional designations include CERTIFIED FINANCIAL PLANNER® (CFP®), Personal Financial Planner® (PFP®), and Trust and Estate Practitioner (TEP).

Beyond the Office

I enjoy being outdoors—whether it’s camping in the mountains with friends or out on a trail hiking or biking. I also love travelling and seeking new adventures, and at home, life is kept lively by my two young kids (ages 4 and 1). I proudly cheer for the Flames and Raptors whenever I can.

Rear view of two university students walk down campus stairs at sunset

As families prepare for another school year, many focus on tuition costs, course registration, and housing arrangements. One planning opportunity that often gets overlooked is how and when to withdraw funds from a Registered Education Savings Plan (RESP).

While RESPs are well-known for helping families save for post-secondary education, withdrawal decisions can affect both taxation and the overall value derived from the plan. As a student approaches graduation, thoughtful planning can help ensure you fully benefit from the tax advantages, investment growth, and government grants accumulated over the years.

Understanding RESP withdrawals

When a beneficiary (student) is actively enrolled in a qualifying post-secondary program, proof of enrolment will be required to make a RESP withdrawal. Eligible withdrawals can generally be taken in two ways:

	Funds come from	Tax treatment	Limits
Education Assistance Payment (EAP)	Government grants + investment growth earned with RESP	Taxable to student in the year withdrawn but may result in little or no tax due to student’s lower tax bracket	During the first 13 weeks of enrolment withdrawals are limited to $8,000 for full-time and $4,000 for part-time students. Subject to annual maximum of $29,459.
Post-Secondary Education (PSE) Withdrawal	Original contributions	Withdrawn tax-free	No prescribed limit

Leaving the door open for future education

One of the strengths of an RESP is its flexibility. Plans can remain open for up to 35 years, allowing families to preserve funds for future educational opportunities such as graduate degrees or other qualifying post-secondary programs.

In a family RESP, government grants can be shared among beneficiaries, subject to the maximum grant limit currently available to each individual ($7,200). This flexibility can be helpful if one child does not pursue post-secondary education or does not fully utilize their available grants.

Maintaining a balance within the plan may be worthwhile if there is a reasonable possibility that one or more beneficiaries will pursue additional education. Any remaining funds continue to grow on a tax-deferred basis and can later be withdrawn as EAPs, with the taxable income attributed to the student.

This flexibility is particularly valuable in today’s environment, where career paths often evolve, and returning to school later in life has become increasingly common. Keeping an RESP open preserves this optionality without immediate tax consequences.

If RESP funds remain unused

Ironically, one of the biggest RESP mistakes is being too cautious with withdrawals. We often see families withdraw only small amounts each year, only to discover near graduation that a significant balance remains in the plan. Because government grants and investment growth are taxed in the student’s hands, the ideal time to withdraw these funds is typically while they are enrolled in school and have little other income. Taking larger withdrawals during the second, third, and fourth years of a program can often result in little or no tax for the student and help avoid a much larger tax bill later for the subscriber.

If no beneficiary pursues further education, the RESP will eventually be wound down (provided the beneficiary is at least 21 years old), and the tax treatment becomes less favourable.

When an RESP is collapsed, the assets are essentially split into three categories:

Government grants – any unused grants remaining must be repaid to the government
Original contributions – returned to the subscriber (who owns the RESP) tax-free
Accumulated investment growth – withdrawn as an Accumulated Income Payment (AIP)

AIP withdrawals are subject to full taxation in the subscriber’s hands as interest income, regardless of how the income was earned within the plan. In addition, a 20% surtax applies on top of regular income tax, making it the most punitive and least favourable tax outcomes available within an RESP.

Case study

This case study highlights the importance of withdrawal planning. In this example, an RESP still holds $100,000 after a child completes their education, including $36,000 of original contributions, $7,200 of grants and $56,800 of accumulated investment income.

Had the growth and grant portion been withdrawn as EAPs during the student’s studies, the tax liability may have been minimal or nil.

If funds remain in the RESP after studies are complete, an RRSP transfer of eligible accumulated income may help mitigate tax, subject to available RRSP room and a $50,000 AIP transfer limit. Unlike a regular RRSP contribution, the transfer does not create an additional tax deduction. Rather, the deduction is generally used to offset the taxable AIP, allowing the funds to remain tax-deferred within the RRSP. If a rollover is not possible, the tax consequences can be substantial. Assuming the subscriber is in a 30% average tax bracket, the tax cost on the $56,800 of remaining growth would be $28,400.

An RESP Holding $100,000	Scenarios	RRSP Transfer	Applicable tax rules	Total Tax & Penalty amount (20% penalty + assuming 30% marginal tax rate)
Contributions = $36,000 Grants (max lifetime) = $7,200 Growth (investment income) = $56,800	#1: Withdrawn by student during studies	N/A	$36,000 – withdrawn tax-free $7,200 & $56,800 withdrawn at student’s marginal tax rate	Often minimal or nil
	#2: $50,000 RRSP transfer	$50,000	$36,000 – returned to subscriber tax-free; $7,200 – returned to government; $56,800 – $50,000 RRSP transfer = $6,800 subject to tax and penalty	$6,800 x 30% tax rate & x 20% penalty = $3,400
	#3: No RRSP room available	$0	$36,000 – returned to subscriber tax-free; $7,200 – returned to government; $56,800 subject to tax and penalty	$56,800 x 30% tax rate & x 20% penalty = $28,400

Key takeaways for families

As students return to campus, this is an ideal time to revisit your RESP strategy. If the eligible RESP beneficiary is nearing completion of their program, decisions made today can directly influence the tax efficiency of withdrawals and the overall value derived from the RESP.

If additional schooling is expected or possible, maintaining some balance in the RESP may be appropriate
If further education is unlikely, prioritizing RESP withdrawals while the beneficiary remains eligible can help maximize the value of the plan and avoid less favourable tax outcomes on unused funds

Thoughtful planning can help families maximize the value of RESP benefits, including tax-deferred growth, government grants, and opportunities for tax-efficient withdrawals. As always, reviewing withdrawal strategies alongside your broader financial plan can help ensure decisions remain aligned with both short-term needs and long-term objectives.

For additional information, please refer to the Government of Canada’s resources on RESP withdrawals and AIPs:

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