One of the many “non-medical” effects of the COVID-19 virus has been the devastation wrought in employment. We have seen changes in how work is done, where work is done, and indeed what type of work is available.
When “normal” returns, the result may be dramatic downsizing in certain industries and opportunities created in others. Keeping your job skills current to be able to adapt to the new normal will be critical. This suggests that skills training will be in great demand.
How to pay for that education? A little-used Federal program could help – the Lifelong Learning Plan (LLP).
Lifelong Learning Plan Basics
The LLP bears some similarity to the Homebuyers Program (HBP), in that it is effectively an interest-free loan from your RRSP. The main points:
- To qualify as a participant, you must be 71 or younger and be a Canadian resident
- You must enroll in a qualifying educational program (see below)
- The total amount of withdrawals over the life of the educational program cannot exceed $20,000
- The maximum withdrawal for a given year is $10,000
- Monies must have been in your RSP for at least 90 days before the withdrawal
- Repayments to the RSP must start no later than the earlier of the fifth year following the year of the first withdrawal or the year following the last year in which the student was enrolled on a full-time basis.
- The maximum repayment period is 10 years. In the first year of repayment, the minimum payment would be the amount borrowed divided by 10.
- The portion of any minimum payment not made in a repayment year must be added into your income in that year
Qualifying Educational Program
- Must last at least 3 consecutive months
- Requires students to spend 10 hours or more per week on courses or work associated with the program
- Must start before March of the year following the LLP withdrawal
To benefit from the maximum 10 year repayment period, you would ordinarily be expected to complete the program enrolled in, or at least continue to be enrolled in it, to the end of March of the year following the LLP withdrawal.
An interesting aspect of the LLP is that your spouse can be the student who uses the money you draw from your RSP. However, you would not be able to make another withdrawal at the same time where you would be the student.
When to use the Lifelong Learning Plan
While the LLP can be useful, you need to make sure that its use will not throw your retirement planning into disarray. You are losing the compound return on the money withdrawn over a 10 year or slightly longer period. This is a particularly important consideration for those people without an employer defined benefit pension plan. Discussing this with your Scrivens advisor will help you in determining whether the LLP is a good tool for you.
You can access more detailed information on the Lifelong Learning Plan site on Canada.ca.