Lifelong Learning Plan
Posted 29 Aug 2014 by Natalie LeBlanc
The Lifelong Learning Plan (LLP) is a program from the Canada Revenue Agency (CRA) that allows a registered retirement savings plan (RRSP) owner to withdraw funds from their RRSP, tax-free, to fund full-time post-secondary education or job training for themselves or their spouse. This is an excellent opportunity for those individuals with registered retirement savings that could be put to use now to further their education, and hopefully their career.
Like any CRA program, there are conditions to participate. First of all, the LLP withdrawals need to be repaid into your RRSP over, at most, 10 years. After filing your tax return, you will receive an LLP statement of account along with your notice of assessment which will tell you your minimum repayment for the year (usually one-tenth of the amount you withdrew under the plan). Thankfully, you don’t have to pay any interest on these payments. Keep in mind, your RRSP contribution limit doesn’t affect your payments (even if it’s $0 or negative) because LLP repayments aren’t considered RRSP contributions and are therefore not tax deductible.
There are a few great perks to this plan:
- Withdrawals can be made to finance either your own or your spouse’s education. You can even both participate at the same time!
- Withdrawals are not limited to the amount of your tuition;
- You can participate in the program more than once, provided your have repaid your previous withdrawals
- You can participate even if you have made RRSP withdrawals under the Home Buyer’s Plan (HBP)
Similar to RESP withdrawals, you must be enrolled in a qualifying educational program at a designated institution. These usually include universities, community colleges, and trade schools. The program must also be full-time – part-time enrollment is only acceptable if you meet conditions of disability. The ability to withdraw under the program ceases after the January of the fourth calendar year after the year you made your first LLP withdrawal (this basically means the length of participation is limited to four years).
If you’re thinking, “This sounds like a great plan! I’ll set up an RRSP now to withdraw for September’s tuition,” think again! The money you withdraw from your RRSP has to be held in the plan for at least 90 days before you can make a tax-free LLP withdrawal. The maximum total withdrawal you can make over the length of your education is $20,000, and you cannot withdraw more than $10,000 in one year.
Despite the conditions and rules (there will always be rules!), the Lifelong Learning Plan is a great option for Canadians with retirement savings who are thinking of going back to school. If you are considering the plan, give us a call and we can discuss if it will work for you.