GUEST COLUMN: Back to school
It’s one of the perks of being comfortably retired after years spent building a career and raising a family – you now have the luxury of making personal choices.
Like heading back to school to develop new skills, reawaken a life-long dream, explore new interests or to learn just for the pure joy of it.
Every education choice has a cost. That’s why your retirement plan should include the funding that will allow you to return to the classroom. Here are a few options to get you going back to school.
Expand your RRSP eligible investments – You already know that a balanced, retirement-funding investment strategy should include RRSP eligible investments, the best tax-deferred, retirement-savings builder for most Canadians. Consider expanding your RRSP investment strategy to provide a money source for the extra costs of your return to education.
Borrow from your RRSP – Through the government’s Lifelong Learning Plan (LLP), you can withdraw up to $20,000 from your RRSP-eligible investments for qualifying forms of training and education. But this is an option you don’t want to rush into because you are required to repay your LLP withdrawals within a 10-year period or they become taxable and you’ll also lose the significant tax-deferred growth those savings could have provided if left inside your RRSP for those 10 years. Repayments cannot be made after the end of the year in which you turn 71, so if you still have a balance at that time, you’ll have to pay tax on it.
Establish a TFSA – Any Canadian over 18 can save up to $5,000 a year in a Tax-Free Savings Account (TFSA). Contributions are not tax-deductible but the investment earnings are tax-sheltered and taxes are not applied to withdrawals. Could be a good way to save for your education expenses.
Establish your own RESP – People of any age can benefit from the tax-deferred savings offered by a Registered Education Savings Plan (RESP) eligible investments, although, as an older student, you will not receive the added benefit of the Canadian Education Savings Grant and other government grants that are available to younger plan beneficiaries. Still, you may be in a lower tax bracket when you make your withdrawals to go back to school, so the tax deferral may result in you paying less tax than you would if you had invested outside the RESP.
If you see a real or virtual classroom in your future and would like to realize your other retirement dreams, talk to your professional advisor about the best path to a financially secure retirement.
The Canada Education Savings Grant and Canada Learning Bond (CLB) are provided by the Government of Canada. CLB eligibility depends on family income level. Some provinces make education savings grants available to their residents.
Andy Erickson is the division director with Investors Group, Vernon. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.