What is a Registered Disability Savings Plan?
- A long-term savings plan created by the Government of Canada for individuals with disabilities to obtain financial security in the future.
Eligibility for RDSP
- Must be recipient of the Disability Tax Credit from the Canada Revenue Agency**
- Be a resident of Canada
- Be less than 60 years of age
- Have a valid Social Insurance Number
** To get the disability tax credit you must apply through the Canada Revenue agency.
How it works:
The Government of Canada provides grants and bonds to contribute to RDSPs along with beneficiary’s own contribution. A beneficiary is the person with the disability who has opened the RDSP and will receive the funds in the RDSP when it matures.
The RDSP must be set up by the person with the disability, unless they are a minor or not legally competent to sign a contract. There can be only one beneficiary (i.e. the person with the disability) of the plan however, there can be multiple people contributing funds. Your financial advisor will provide you with the forms and applications to set up the RDSP.
Highlights of the Plan:
- If the beneficiary is under the age of 18, the Government of Canada will use the guardian’s income to determine the amount of grants and bonds they qualify for. After the age of 18, the Government of Canada will use the beneficiary’s income.
- The maximum lifetime contribution that an individual can make is $200,000 with no annual contribution limit.
- Contributions are not tax deductible.
- The Government of Canada will contribute to your RDSP up to the end of the year you turn 49. You can only contribute to your RDSP until the end of the year you turn 59.
- The grants will match your contributions up to 300% depending on your income.
- The bond is given to low income families and the maximum lifetime limit is $20,000.
- Withdrawal for retirement must begin by the end of the year the person turns 60, it does not impact benefits such as OAS, GIS, GST.
Please note: The purpose of the RDSP is for long term, retirement planning. If you decide to withdraw from the RDSP early, please ensure you read all the details of the plan as penalties and limits apply. It is not a short-term savings account. If you need a short-term savings plan, a tax-free savings account is an option.
For more information, please contact your financial advisor.