Investing in Knowledge: Lifelong Learning Plan
Posted 21 Sep 2016 by Patricia Bell, PFP
An investment in knowledge pays the best interest… At least according to Ben Franklin. Whether you’re retired or considering a career change, you may have one more option to pay for furthering your education than your classmates: your RRSP.
Does it ever make sense to use your hard earned retirement savings for something other than retirement? Maybe you’re not ready to fully retire but want to change the pace of your life and find more fulfilling ‘work’. Maybe you’re looking for a second career. Or maybe you are just one of those people who love to learn. Whatever your reasons, it may be advantageous for you to use a little known government program called the “Lifelong Learning Plan,” or LLP, to borrow from your RRSPs.
The LLP is similar to the much more popular Home Buyer's Plan but instead of helping you buy your first home, the LLP is used to assist you in paying for post-secondary education costs for you or your spouse or common-law partner.
Under the LLP provision, you can withdraw up to $10,000 from your RRSP each year without withholding tax (to a maximum of $20,000) if:
- You are enrolled at a designated educational institution;
- The program you are taking is a qualifying education program;
- You are attending full-time. (However, if you meet the CRA’s conditions of disability you may qualify while studying part-time).
You have up to 10 years to repay your LLP withdrawal by making RRSP contributions and designating them as LLP repayments. If you don’t make the minimum repayment required in any given year CRA will designate that year’s payment (not your full withdrawal) as income and it will be taxed at your marginal tax rate. You can opt to repay the LLP sooner than required but whether or not this is a good choice (as there is no “interest” on this money you’ve lent yourself!) depends on your personal situation. The program basically allows you to borrow from your future self, and to pay yourself back without interest.
If you’re considering taking advantage of the LLP, make sure you talk to your advisor. Run through a projection of your income and taxes before making any decisions. Everyone's situation is different and you’ll want to ensure you’re making the best choices, for now, and for your retirement.
Disability LLP withdrawals: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/llp-reep/cndtns/flltm-eng.html