RESP - Late in the game.

[meandmyson]

Friends,

My son is 14 and will turn 15 in September 2019. He will turn 18 in September 2022.

I am investing in RESP starting this month, February'19. The plan is make an initial deposit of 5000 CAD and monthly investment of 1000 CAD.

The agent am working with from Global RESP says that my total contribution at the end of maturity will be 40000. Whereas, as per my calculation it should be 47,0000.

Feb'19 to Sept'22 = 43 months = 47000
Feb'19 to Feb'22 = 36 months = 40000

As per my agent, he says they only take the signing month into the account and since my son will turn 18 in the year 2022, my investment will end in Feb'22. In case, I need to invest until Sept'22, then I will have resubmit few forms in Sept'21 (son turns 17) which will allow me invest until he turns 18.

Is this true? Am I not allowed to invest until my son turns 18 without having to make amendments in the middle?

 

[BC4life]

It is not that simple, I would advise reading more about it because investing for three years is unlikely to have much benefits. To get the maximum amount of grants (20% for the CESG) the limit is $2,500 per year, and for "catching up" I believe this would be the double ($5K per year, you can catch up only one year at a time). Any amount above the 5K per year does not get any grant, the only advantage is that it would be a registered account so any income would not be taxed.

 

[meandmyson]

It is not that simple, I would advise reading more about it because investing for three years is unlikely to have much benefits. To get the maximum amount of grants (20% for the CESG) the limit is $2,500 per year, and for "catching up" I believe this would be the double ($5K per year, you can catch up only one year at a time). Any amount above the 5K per year does not get any grant, the only advantage is that it would be a registered account so any income would not be taxed.

Thanks for the reply.
If you can please confirm if indeed I cannot invest until my son turns 18 without having to make amendments in the middle, due to the catch up?

 

[BC4life]

Thanks for the reply.
If you can please confirm if indeed I cannot invest until my son turns 18 without having to make amendments in the middle, due to the catch up?

No I did not say that. You can contribute immediately, but for the 20% government grant, you will only get it for 6 years at most (from now until 2022, plus the three years you are catching up), so a total of $15,000. Paying more than that would not attract any more grant.

I am not a financial advisor so please make sure to get this confirmed by an independent third party (not the company where you will be opening the RESP)

 

[meandmyson]

No I did not say that. You can contribute immediately, but for the 20% government grant, you will only get it for 6 years at most (from now until 2022, plus the three years you are catching up), so a total of $15,000. Paying more than that would not attract any more grant.

I am not a financial advisor so please make sure to get this confirmed by an independent third party (not the company where you will be opening the RESP)

Thanks again.

 

[BC4life]

Read these three articles on catching up with contributions:

https://help.wealthsimple.com/hc/en-ca/articles/115004109707-Is-there-a-maximum-amount-I-can-contribute-to-an-RESP-
https://www.blueshorefinancial.com/ToolsAdvice/Articles/EducationSavings/TheRESPCarryForward/
https://www.planeasy.ca/catch-up-resp-contributions-free-government-grants/

 

[canuck78]

I would also question why you need an agent and how much commission they are taking. Most can manage their RESP by themselves especially since you will need the money in a few years so should be investing in relatively safe investments.