Registered Disability Savings Plan

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A piggy bank wrapped in bandages with a set of crutches.There are many people in Canada who are either born with a disability or develop one in the early stages of their life. Sometimes this disability can inhibit their ability to maintain a career that will support them, or to retire with a pension. Sometimes it can prevent them from working at all. It becomes an ever-growing fear for parents: how will their child be able to support themselves later in life?

In situations like these, families may want to consider the Registered Disability Savings Plan.

The Registered Disability Savings Plan is a federal tax-deferred savings program. The plan helps parents of disabled dependents increase their savings for long-term financial security. Here are some of the highlights:

  • The lifetime contribution limit on an RDSP is $200,000, and holders can continue contributing until the age of 59.
  • Family members who have RRIFs or RRSPs can designate the RDSP as a beneficiary of their plans, to help their loved ones maximize their savings.
  • Contributions made to an RDSP are not tax deductible, and are therefore not considered income when withdrawn.
  • Only bonds, grants, and growth of the principal are counted as income when withdrawn from an RDSP.
  • The Canada Disability Savings Grant is an additional amount the Government of Canada contributes to an RDSP. The government will pay a matching grant depending on the beneficiary's family income and the amount contributed to the RDSP.
  • In addition, low income families can be eligible for a bond amount of up to $1000 a year.

The RDSP program is highly under-utilized, primarily because most branch-level financial institutions don't have enough information about it. This is very unfortunate, as the money in an RDSP can really add up if it is used to its full potential.

If you or someone you know could benefit from the Canadian RDSP program, please have them contact a financial advisor to discuss the options best suited to their financial situation. The deadline for parents or guardians to open an RDSP for a minor child before the next tax year is December 31, 2018.