RRSP 302: How to Leverage the RRSP Lifelong Learning Plan (LLP) to Support Your Career Development?

Key Takeaways:

• The RRSP Lifelong Learning Plan (LLP) empowers individuals to access funds from their RRSP for qualifying full-time technical or vocational training, as well as eligible post-secondary school expenditures.
• The yearly withdrawal ceiling is $10,000, with a cumulative cap not surpassing $20,000.
• The repayment period is up to 10 years, with an annual requirement to repay 10% of the withdrawn sum.

Have you ever contemplated enhancing your career through further education after gaining work experience? If you harbor the intention but encounter a shortfall in financing educational expenses, here’s encouraging news. The RRSP Lifelong Learning Plan (LLP) offers a viable solution, allowing you to leverage funds from your RRSP to bolster your educational pursuits. In this article, we will tackle frequently asked questions regarding the LLP plan.

What is the RRSP Lifelong Learning Plan (LLP)?

The RRSP Lifelong Learning Plan (LLP) is a governmental program designed to enable individuals to extract funds from their RRSP for the purpose of funding a qualifying educational program, whether for oneself, one’s spouse, or common-law partner.

What is a qualifying educational program?

A qualifying educational program is an educational program offered at a designated educational institution.

The program must be one of the following:

• of a technical or vocational nature designed to provide a person with skills for, or improve a person’s skills in, an occupation, in the case where the program is at an educational institution certified by ESDC
• at a post-secondary school level, in any other case

All programs must meet both of the following conditions:

• last three consecutive months or more
• require a student to spend 10 hours or more per week on courses or work in the program. Courses or work includes lectures, practical training, and laboratory work, as well as research time spent on a post-graduate thesis. It does not include study time. ¹

How much can I withdraw?

As long as you qualify each year, the LLP allows you to withdraw up to $10,000 per year from your RRSP until January of the fourth calendar year after the year you made your first LLP withdrawal. However, the cumulative withdrawal ceiling is capped at $20,000. In simpler terms, if you opt for the maximum withdrawal of $10,000 each year, no further withdrawals can be made after two years.

It’s important to note that if you don’t have an RRSP, you cannot establish one and make LLP withdrawals immediately . Your contributions must be held in the RRSP for 90 days before they can be used for LLP withdrawals.

Are there any repayment requirements for LLP withdrawals?

Certainly, there are. Once the repayment period begins, you have up to 10 years to repay the amount withdrawn under the LLP back into your RRSP. Generally, you are required to repay 10% of the total amount withdrawn each year until the entire amount is repaid.

The start of the repayment period depends on whether the LLP student is considered a qualifying student for at least three consecutive months in that year. If the LLP student does not meet this condition for two consecutive years, the repayment period will start in the second of those two years. If the LLP student continues to meet this condition for four consecutive years, the repayment period will start in the fifth year after the first LLP withdrawal.

If you fail to repay the required repayment amount (10% of the total withdrawn amount) in any year of the repayment period, the unpaid portion will be considered as income for that year, and you will be required to pay the corresponding taxes.

In conclusion, the RRSP Lifelong Learning Plan is a powerful tool for Canadians wishing to invest in their own or their spouse/common-law partner’s education. Through the LLP, you can make informed decisions aligned with your long-term financial and educational goals. Be sure to be aware of the LLP’s conditions and repayment schedule to avoid potential tax issues.

For more RRSP-related articles, please visit our RRSP Registered Retirement Savings Plan Guide.

1. Lifelong Learning Plan.

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Published Date: February 25, 2024

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