how does one calculate the amount needed to catch up on RESP contributions so that we can get maximum possible CESG grant up until this year?
so I have a 6 year old kid and no resp has been done.
how much should i put in this year to get all the cesg grant for past years?
I believe there is no max annual contribution any more but max basic cesg per year is $500.
So should I contribute 6*2500 = 15,000 to get max cesg?
Location: carl sagan's universe
Posted on: 30-04-09 21:11:15
The lifetime max contribution is $50,000 which can be done in a year, so there is a max per year.
Quote:
Originally posted by NewDesiInTown
how does one calculate the amount needed to catch up on RESP contributions so that we can get maximum possible CESG grant up until this year?
so I have a 6 year old kid and no resp has been done.
how much should i put in this year to get all the cesg grant for past years?
I believe there is no max annual contribution any more but max basic cesg per year is $500.
So should I contribute 6*2500 = 15,000 to get max cesg?
NO.
You can get up to a maximum $1000 of CESG at a time, which will have up to $500 for present year conribution and remaining $500 catch up from previous years. This means that if your son is 6 years or lets say born in 2003 and has been a PR or citizen ever since, you will take at least 6 years to catch up the lost CESG provided you keep on contributing for a minimum of $ 5000 every year. The life time maximum contribution is $50,000. However, any thing you contribute over $5000 in a year would not get you the CESG and you will have to again put $5000 next year to claim for 1 more year of catch up and so on. The maximum CESG over life time is only $7200.
Read these
http://www.canlearn.ca/eng/saving/cesg/faq.shtml
http://www.canlearn.ca/eng/saving/cesg/brochure/index.shtml in detail to understand about RESP and CESG.
Whatever you do, please stay away from Group RESP or scholar ship plans. There have been so much written about the RESPs on this forum which if you read thoroughly, would help you make up your mind and clear the concept for you.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Quote:
Originally posted by NewDesiInTown
how does one calculate the amount needed to catch up on RESP contributions so that we can get maximum possible CESG grant up until this year?
so I have a 6 year old kid and no resp has been done.
how much should i put in this year to get all the cesg grant for past years?
I believe there is no max annual contribution any more but max basic cesg per year is $500.
So should I contribute 6*2500 = 15,000 to get max cesg?
Based on the information you provided
-your kid was born in 2003.
-You want to open RESP in 2009.
Here is the answer
-Each child accumulates $400 (before 2007) or $500 in
Grant room per year, even if an RESP hasn’t been
Opened in their name
-This room is cumulative and not annual.
Assuming child was eligible for CESG on 2003, your child is entitled for basic CESG of 4*400 + 3*500=3100 (unto 2009).
But here is the catch. Gov. will only put max of $ 1000/year (20 % of $ 5000) if you have accumulated grant room (meaning your child was eligible for CESG in 2003). In other words even if you contribute $ 15,000 in 2009, you will get a max grant of $ 1000 only and the balance will not be eligible for the grant in future years.
My advice would be to split 15K and contribute 5K each year to get max eligible CESG
Here is how you can do it
In 2009 Contribute 5000 (you get 500 for 2009, 400 for 2003 and 100 for 2004)
In 2010 Contribute 5000 (you get 500 for 2010, 300 for 2004, 200 for 2005)
In 2011, contribute 5000 (you get 500 get 2011, 200 for 2005, 300 for 2006)
In 2012 contribute 5000 (500 for 2012, 100 for 2006, 400 for 2007)
In 2013, contribute 5000 (you get 500 got 2013, 100 for 2007, 400 for 2008)
2014 contribute 5000 (you get 500 for 2014, 100 for 2008)
By end of 2014 you will be able to catch up with unused max available CESG upto year 2009.
I hope it is clear now. Remember 50K is a lifetime contribution limit and annual limit for CESG grant is $ 1000.
You can do one time 50 K contribution but get only $ 1000 for grant. You money starts growing from day one but you loose benefit of dollar cost averaging and 20 % grant (I consider this as good as 20 % guaranteed return)
Location: carl sagan's universe
Posted on: 01-05-09 10:08:45
Actually the RESP grant goes backwards.
The contribution of $5000 this year gets you the grant from 2008.
The cont of $5000 next year(2010) gets you the grant of 2007
The Cont of $5000 in 2011 gets you the grant of 2006(only $400 that year)
and backwards till 2003/2002.
6 year old born in Oct 2002 is still 6 years old which is why I have included 2002, since you have not specified the birthdate.
Also there are good scholarship plans out there so don't know why you are being warned away from them.
Location: carl sagan's universe
Posted on: 01-05-09 13:01:48
Also since the lifetime tops is $50,000 and you still have 12 years to contribute, maybe after the first two years to get your max CESG, you might want to consider dropping it to $4,500 to get your past CESG as then you will be in 2006 territory when the 'max' contribution was $2,000 and the CESG was $400.
Then when you get all the way down to 2002/2003 you can contribute $2,500 or whatever is the tops for grant at that time.
Over contribution at that time should be evaluated then
Many people used to over contribute into the RESP for tax free growth of money but this year they will contribute only $2,500 and the over contribution will go into a TFSA- prudent measure in my opinion.
By over contribution I mean what is not eligible for grant because you get grant only on $2,500 even if you put $4,000 in an RESP if there is no catching up to do, which is also why 'max' is within apostrophes
Hope all this info is not confusing.
Many thanks investpro, Pramod Chopra and rsbagwell.
so just to keep things simple for a child born in 2003 and with no RESP yet, if I contribute $5000 starting from this year, I should be able to recover the max cesg grant over the next 6 years and also get max eligible grant each year.
After 6 years, I can drop the annual contribution to 2,500 and get the max grant (assuming rules stay the same).
Is that correct?
regarding group plans, i have read more on them and I have no interest in those.
I once almost got duped by a CST or UT salesperson fortunately i didn't sign up.
I plan to do a self-directed plan at my bank (TD).
