RDSP: Building peace of mind and a secure financial future for Canadians living with disabilities
When it came to her retirement savings, Selena Gusikoski, a business development director with Concentra Trust, felt she was on track, but worried about her brother Cody, who is eligible for the Disability Tax Credit (DTC), but hadn’t built up meaningful savings for his future.
“I had heard about the Registered Disability Savings Plan (RDSP), but had never taken the necessary time to help Cody set up an RDSP," she shares.
Does that sound like you, or someone you know? You’re not alone. The RDSP was introduced by the federal government in 2008 as a long-term savings plan for Canadians with disabilities and their families.
The plan is a powerful savings vehicle. You could receive up to $90,000 in government grants and bonds, and grow your savings into hundreds of thousands of dollars with only small monthly contributions.
Yet a shocking number of eligible Canadians aren’t taking advantage of the opportunity. In fact, a 2018 Senate of Canada Committee report, Breaking Down Barriers, noted that although the DTC is an essential benefit for the more than 1.8 million Canadians living with a severe disability, only 40% of those who have qualifying disabilities claim the tax credit, and of those, only about 25% have opened RDSPs.
The earlier an RDSP is opened, the more money can be earned. Read on to learn why it might be the right choice for you or your loved ones.
You are eligible for an RDSP if:
You are eligible for the Disability Tax Credit (DTC)
You are under the age of 60
You are a Canadian resident with a Social Insurance Number (SIN)
You can open an RDSP for:
Yourself, if you are the age of majority
Your loved one if they are under the age of majority, or unable to complete the application on their own
You can contribute to an RDSP:
Any amount each year, up to a lifetime contribution limit of $200,000
Anyone can contribute to an RDSP with written permission from the account holder
Contributions to an RDSP:
Build tax-free until they are withdrawn
Are eligible for a matching government grant up to 300%
Can include cash, GICs, and mutual funds*
“As soon as we were approved for the DTC, Canada Revenue Agency notified us we were eligible to open an RDSP,” shares Alex, a working dad whose son was born with a disability in 2010. “The process was very easy — since we were eligible for the DTC, all we needed were our SIN numbers.”
There’s no wrong time to open an RDSP, but there are major benefits to starting as soon as possible.
The sooner the better
As with most savings accounts, the earlier you start contributing, the more time your savings have to grow with the help of compound interest.
But the RDSP has a powerful secret weapon — government contributions, which can grow your long-term savings by a startling amount.
If you were to open an RDSP for a five-year-old whose parents had a net family income under $85,000 and contributed $50 a month, by the time the child turns 60, the RDSP would have $682,000** in savings.
If that same five-year-old had parents with a net family income over $85,000, and contributed $417 a month, by the time that child turned 60, their RDSP would have an astonishing $1.9** million in savings.
Let’s take a closer look at how government funding can play a major role in reaching those numbers.
Government funding can grow your savings
The federal government will match an incredible amount of your RDSP contributions, depending on your household income. They do this through the Canadian Disability Savings Grant (CDSG) and the Canadian Disability Savings Bond (CDSB).
“My brother opened an RDSP in 2021. Because he is a low-income individual, he will automatically receive $1,000 in Canada Disability Savings Bond every year, and if he makes contributions to his RDSP he will receive 300% in matching funds from the Canada Disability Savings Grant,” says Selena.
If your household income is less than $48,535, the government will pay a bond of up to a yearly limit of $1,000, (regardless of whether you contribute to an RDSP) and a lifetime limit of $20,000 into your RDSP.
The government will pay matching grants of 300%, 200% or 100% depending on your household income, up to a yearly limit of $3,500 and a lifetime limit of $70,000
“Cody had $900 he wanted to deposit to his RDSP,” explains Selena. “He received $11,000 in Canada Disability Savings Bond, due to previous years’ of entitlement. The Government of Canada paid $2,700 in Canada Disability Savings Grant. Now he has $900 in contributions, $11,000 in bond and $2,700 in grant for a balance of $14,600.”
“It’s been amazing because my brother didn’t have the guaranteed security a lot of our family has,” says Selena. “The RDSP is a wonderful government program that will help him save for his long-term financial needs.”
Speak with us today
Are you thinking of opening an RDSP? Take the next step!
*Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Unless otherwise stated, mutual funds, other securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions.
**Assuming a moderate rate of return of 5% annually, continued personal contributions until 59, and no withdrawals before the age of 60
Standing Senate Committee on Social Affairs, Science and Technology. (2018, June 27). Breaking Down Barriers: A critical analysis of the Disability Tax Credit and the Registered Disability Savings Plan. https://sencanada.ca/en/info-page/parl-42-1/soci-breaking-down-barriers/)