Withdrawing RRSP funds can be good for students, home buyers

Saving for education or buying a home often have higher priorities for young people than contributing to an RRSP.

But the Home Buyers Plan and the Lifelong Learning Plan can provide options for anyone saving for retirement but in need of investing in more immediate priorities.

The LLP allows you to withdraw up to $10,000 in a calendar year from your RRSP to finance training or education. You can't withdraw more than $20,000 in total. To qualify, three conditions must apply:

- The person must be a full-time or a part-time student if he or she meets the disability conditions.

- The RRSP owner has to be a resident of Canada.

- The student has to enrol in a qualifying educational program at a designated institution.

People may participate in the plan as many times as they wish after repaying an LLP withdrawal. You and your spouse may also be participants in the LLP at the same time. You may be eligible to participate in the LLP even if you have withdrawn amounts from your RRSP under the HBP that have not been fully repaid.

Students must receive a written offer to enrol before March of the year after a withdrawal from their RRSP. Participants who withdraw funds from their RRSP under the LLP must repay the amounts over a period of up to 10 years.

With the HBP, young people who begin contributing to an RRSP may not even own a house yet. Does it make sense to contribute to an RRSP if you think you will need to keep funds liquid to buy a home? In some cases the answer is yes.

The HBP allows participants to withdraw up to $20,000 in a calendar year from an RRSP to buy or build a qualifying home. Couples may each utilize the HBP (combined maximum of $40,000). The plan may be suitable for any first-time home-buyers who are buying a home and may need additional funds to pay for a down payment or reduce financing costs. Participants have up to 15 years to repay the amount that is withdrawn.

(prepared by Keith and Kevin Greenard/Vancouver Province)