Building Financial Security for Canadians with Disabilities
Many families worry about how a loved one with a disability will be cared for in future years. Thanks to the RDSP and federal grants and bonds, now it is easier for people with disabilities to save for their long-term financial security.
Why RDSPs are a great way to save?
Anyone can contribute to an RDSP with the written consent of the account holder.
The money you contribute grows tax free.
The total lifetime contribution for each beneficiary is $200,000, with no annual contribution limits.
Contributions can be matched, based on family net income, with up to $3,500 a year in Canada Disability Savings Grants and up to $1,000 a year in Canada Disability Savings Bonds.
Savings and withdrawals do not affect federal and provincial income-tested benefits.
Carry forward on CDSG and CDSB is available back 10 years or to date of diagnosis. Since RDSP was launched in 2008 carry forward can go back to then. Maximum grant someone can receive in a year is $10,500 and maximum bond is $11,000.
Who qualifies for an RDSP and how do you open a RDSP account?
You qualify to be an RDSP beneficiary if you are a recipient of the Disability Tax Credit, a resident of Canada, less than age 60 and have a valid Social Insurance Number.
If you haven’t already, apply for the Disability Tax Credit (see www.cra-arc.gc.ca/disability )
See your financial advisor to open an RDSP
Canada Disability Savings Grant
Through the CDSG, the Government deposits money into your RDSP to help you save, providing matching grants of 300%, 200% or 100%, depending on the amount contributed and the beneficiary’s family net income. The maximum is $3,500 each year, with a lifetime limit of $70,000.
Canada Disability Savings Bond
Through the CDSB, the Government deposits money into the RDSPs of low-income and modest-income Canadians. If you qualify for the bond, you could receive up to $1,000 a year, with a lifetime limit of $20,000.
Inside the RDSP you can often hold the same investments you would have in an RRSP or TFSA, eg. mutual funds and in some cases with discounted MERs.
Withdrawing your money
RDSP withdrawals must begin by the end of the year you turn age 60. You may withdraw funds earlier however it is important to note - once a withdrawal of any amount is made, $3 worth of federal grants and bonds paid into the RDSP in the previous 10 years have to be repaid for every $1 withdrawn. Withdrawals will consist of non-taxable contributions, taxable Government monies and taxable growth.