Using your RRSP to continue your education

You can withdraw up to $20,000

You want to upgrade your skills or pursue that long-desired MBA, but are challenged to know how you'll cover tuition expenses? The good news is your RRSP savings can help.

The Lifelong Learning Plan (LLP) allows you to withdraw up to $20,000 from your RRSPs to finance full-time training or education for you or your spouse.

As long as don't exceed the $20,000 withdrawal cap, you can take out as much as $10,000 annually or spread your withdrawals over a longer period (e.g., $5,000 a year for five years).

How you qualify

• Be accepted at a designated educational institution by a written offer to enroll (or conditionally enroll) before March of the following year in a qualifying educational program.
• Enroll in a qualifying educational program of at least three consecutive months in length, while requiring you to allocate at least ten hours per week to courses or work in the program.
• Enroll at a designated educational institution – a university, college, or other educational institution qualifying for the purpose of the education tax credit.

Repayment is easy

Borrowing from yourself means there are no interest charges like traditional loans. But you still need to repay the full amount or else you'll be taxed on it. The Canada Revenue Agency will send you a "Statement of Account – Lifelong Learning Plan" every fall listing repayments made, the balance yet to be repaid, and the minimum repayment for the next year.

The start date for the repayments depends on your status as a student. In each year of your repayment period, you typically have to repay one-tenth of your original LLP balance until the full amount is repaid. Repayments are not tax-deductible as new contributions and they don't have to be repaid to the same RRSP from which they were withdrawn.

Be sure to include the LLP on your tax return

Tax returns must include all unpaid balances each year until the LLP withdrawals have been fully repaid, even if you don't owe tax. Any amount not repaid when it is due will be included in your income for the year it was due. You must repay each year at least 10% of the amount borrowed from your RRSP, less any overpayments in previous years.

Want another degree or retrain for a new career?

There's no limit to the number of times you can participate in the plan in your lifetime. Starting the year after you bring your balance to zero, you can participate in the LLP again and withdraw up to $20,000 over a new qualifying period. You can’t however participate after the end of the year you reach 69.

Borrowing from your RRSP – more things to know

By borrowing from your RRSP to gain an education under the LLP, you ensure you won't lose any of the benefits of the previous year's tax deduction and deferral. You can make repayments later or take sums into income as you see fit.

You do lose potential tax-deferred growth during the time the funds are out of your RRSP. So if you have a significant non-registered portfolio, you may want to consider using these other savings first.

Generally, you aren't allowed to withdraw funds from locked-in RRSPs. Also note you can't use your RRSP funds to finance a child's education – check out RESPs to assist with this.

Talk to us

Your financial advisor can help you with a strategy to pay for your education as well as a retirement saving plan that works for you. Get in touch by calling us 604.982.8000 (toll-free 1.888.713.6728), send us a message, or visit a local branch.