As the cost of education continues to rise, it becomes increasingly important to take advantage of the benefits provided by RESPs. Planning for a child’s future education requires careful financial considerations, and the Registered Education Savings Plan (RESP) offers a means of building savings for higher education. However, one thing to be considered with an RESP is its contribution deadline. Understanding the timeline and implications of the contribution deadline is vital for parents, grandparents, and guardians who aim to maximize their RESP savings.
In this article, we will explore the significance of the RESP contribution deadline, its impact on government grants, strategies to optimize contributions, and the potential consequences of missing this critical deadline in 2023. By gaining insight into the contribution deadline, you can make informed decisions and ensure that your child’s education savings plan remains on track.
What is the RESP Contribution Deadline for 2023?
RESPs are great for families with kids, dependent children, or even for empty-nesters who want to still support their grandkids somehow. While RESPs are not tax-deductible, savings that grow in them are tax-deferred until the point of withdrawal. There are also rules surrounding RESP contributions and for funding a child’s future education in this format.
Remember: the maximum RESP lifetime amount is $50,000. There is no maximum amount to how much you may contribute annually, but the government’s program – CESG – will only match a percentage of your initial $2,500 contributions every year, up to a lifetime maximum grant value of $7,200.
The annual contribution deadline for this always revolves around the calendar year, with December 31st marking the last day you can trigger more CESG funds for that year.
Is an RESP Worth Opening?
Depending on your current goals, yes. RESPs are amazing opportunities to give your child, niece/nephew, grandchild, dependent, or whoever, a great headstart financially when it comes to post-secondary education. Since post-secondary is becoming so expensive in Canada, having the means to fund that beneficiary’s experience can go a long way. RESPs are also flexible in that they allow you to keep the account open for 35 years.
There are a lot of post-secondary paths that exist, but university education is said to be one of the most expensive routes. Some cities and schools are more expensive than other ones, hiking the average price even further. RESPs are one of many options as well. You may explore the potential of other savings accounts, like TFSAs, depending on your financial situation and your current future planning. The best savings plan is the one that you can afford, and since daily costs are always going up, it’s important to work with experts to determine what option is best for you. With an RESP and Embark’s advice, you can create a flexible savings plan that works for you.
RESP Contribution Deadline FAQ’s:
Can I contribute to an RESP for previous years?
RESP contributions can be made at any time, up to a lifetime maximum of $50,000 per beneficiary. This means that you can technically contribute as much or as little as you’d please at any time. To make the most out of your contributions and receive the most grants you can from the government, it is typically advisable that you contribute $2,500 each year to your plan until you reach the lifetime Canada Education Savings Grant value of $7,200. However, if you cannot save this much every year, that’s not a problem at all. Unused CESG contribution room can be carried forward to the next year. There are limitations to how much back grant can be collected at a time. To collect grant once a beneficiary reaches age 16 there are additional requirements which must be met. A well established RESP will help meet these requirements.
Note that if your contributions ever exceed the lifetime limit of $50,000, then a 1% penalty tax is levied every month on the excess contribution until that excess is eventually withdrawn from the account.
What happens if you miss a RESP contribution?
With individual or family registered education savings plans, you’re free to contribute when and how much you please to your child’s education savings, to the lifetime maximum. However, frequently forgetting to contribute may mean lower savings accumulation, as regular contributions can help to accumulate savings with time. If you miss a contribution, you could slow down the growth of your savings overall.
This means that failing to regularly contribute may impact the funding your beneficiary has for their education. Consistent contributions to RESPs are necessary to maximize available funds and provide the necessary financial support.
Finally, since most grants have annual maximum allotment values, missing contributions may result in the underutilization of the money available to you and could result in limited overall savings potential.
What’s the contribution limit?
RESPs do not have a yearly or annual contribution limit, however they do have a lifetime contribution limit per beneficiary. Currently, in 2023, the lifetime contribution limit for RESPs is $50,000 – and that’s per beneficiary, so you could make a contribution to another beneficiary without it affecting the contribution room of another.
Grants for savings plans also have a limit. For the CESG, the total lifetime grant amount that eligible beneficiaries may receive is $7,200, which is the same no matter family income. The maximum contribution the government will percentage match for the CESG is $2500 per year or up to $5000 per year if the beneficiary has back grant room. To learn more about grant criteria and allotments, please click here.
Embark is Canada’s education savings and planning company. The organization aims to help families and students along their post-secondary journeys, giving them innovative tools and advice to take hold of their bright futures and succeed.