Episode 329 - Optimal Education Savings, Withdrawals, and Asset Allocation

The Rational Reminder Podcast

Unlocking the power of education savings is often a complex task, but with the right strategies, a Registered Education Savings Plan (RESP) can be a game-changer for Canadian families planning their children's future. In this episode, Ben Felix, Dan Bortolotti, and Mark McGrath take a deep dive into the mechanics of the RESP, covering everything from optimal contributions and grant maximization to tax-efficient withdrawals and asset allocation. They discuss critical factors like the Canada Learning Bond (CLB) for low-income families and the intricacies of group RESPs, noting how pooled plans, though easy to join, can financially penalize those who don’t stay the course. With the RESP’s unique 35-year lifespan and its flexible range of education options, this in-depth conversation brings clarity to a valuable tool often overshadowed by its complexity. Tune in to discover practical strategies that could transform how you fund education, optimize your investments, and make the most of Canada’s RESP benefits.

Key Points From This Episode:

(0:02:43) Purpose and structure of the RESP as a tool to fund post-secondary education.

(0:06:25) Insight and tips for how contribution limits and government matching grants work.

(0:07:13) How the CLB supports low-income families with up to $2,000 without contributions.

(0:10:13) Family RESPs, which allow multiple beneficiaries to share contributions and earnings.

(0:11:54) Distinguishing between Education Assistance Payments (EAP), Post-Secondary Education Payments (PSE), and their tax implications for beneficiaries.

(0:14:27) Front-loading versus annual contributions: optimal contribution strategies to maximize grants and investment growth.

(0:23:22) Tips for tax-efficient RESP withdrawals, especially if beneficiaries have other income.

(0:35:28) Education outside of Canada, over-contribution penalties, and other considerations.

(0:37:28) RESPs and estate planning, including naming a successor subscriber in your will.

(0:42:54) Asset allocation advice: prioritize growth early and stabilize as educational costs near.

(0:48:00) Constructive criticism of RESP policies to increase access for low-income families.

(1:02:02) Summing up the benefits and challenges of RESPs and encouraging families to use them wisely as part of their education savings plan.

(1:07:39) The aftershow: reviews, praise for Dan, and a community debate on expected returns.

Links From Today’s Episode:

Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemindRational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — [e-mail] Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Mark McGrath on LinkedIn — https://www.linkedin.com/in/markmcgrathcfp/ Mark McGrath on X — https://x.com/MarkMcGrathCFP

Dan Bortolotti — https://benderbenderbortolotti.com/about/our-team/

Dan Bortolotti on LinkedIn — https://www.linkedin.com/in/dan-bortolotti-8a482310/

Registered Education Savings Plan (RESP) — https://www.canada.ca/en/services/benefits/education/education-savings/plan.html

Canada Learning Bond — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-learning-bond.html

Aaron Hector: ‘Optimal RESP funding strategies if you have $50,000 to invest’ — https://x.com/AaronHectorCFP/status/1787188396248731967

Aaron Hector: ‘How to draw down a $200k RESP over a 4 year university program’ — https://x.com/AaronHectorCFP/status/1788196751821738360

Employment and Social Development Canada (ESDC) — https://www.canada.ca/en/employment-social-development.html

'How to Invest Your RESP’ — https://benderbenderbortolotti.com/how-to-invest-your-resp/

‘The Regulation of Group Plan RESPs and the Experiences of Low-Income Subscribers’ — https://seedwinnipeg.ca/wp-content/uploads/2024/09/The_Regulation_of_Group_Plan_RESPs_and_the_Experiences_of_Low-income_Subscribers.pdf

Episode 326: Dr. Sunil Wahal: Exploring the Nuances of Financial Science — https://rationalreminder.ca/podcast/326

Papers From Today’s Episode:

‘The Anatomy of Value and Growth Stock Returns’ — https://dx.doi.org/10.2139/ssrn.806664

‘Migration’ — https://dx.doi.org/10.2139/ssrn.926556