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Demonstrating the "RESP advantage"

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This is quick and dirty......

The advantage that the RESP offers is intuitively known by everyone. RRIFmetic can be used to demonstrate 'numbers-wise' how this happens as it relates to a specific individual.

1. First of all, enter all the normal RRIFmetic-type data... salary, loans, capital...etc.

Next, enter the RESP window and put in the parameters for the 1 or several kids.

2. Amortize, and take note of the ATI which solved.

3. Pick out exactly the amount of future RESP income which drops out of the calculation. Let's say that $18,111 fell out of the RESP in years 2018 thru 2023.

4. Remove the RESP data, and enter that same $18,111 into the 'nontaxable income' column as NEGATIVE amounts over that same time frame (2018-2023).

5. Amortize a second time, noting the second ATI. The difference in the ATIs will be the RESP advantage. What the program tells us is that if the RESP were used to fund the child's education rather than simply paying it out of non-RESP capital, the subject will enjoy a $xxx better lifestyle each and every year of his projection. Where $xxx is the difference in the two ATI solutions.

If you are selling RESPs, this is a very specific way to identify how the RESP would advantage a particular client's financial situation.

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