The Registered Disability
Saving today for tomorrow
Canada Disability Savings
If you are a Canadian citizen with a disability, you may worry about how you are going to save for later years.
Disabled Canadians face more employment challenges than their able-bodied counterparts, and that can make it
difficult to save adequately for retirement. The Canadian government has come up with a program that allows
disabled Canadians to have a built-in savings plan on which they can draw when they retire.
Canada's Registered Disability
Savings Plan details
The basics of the plan are as follows:
The RDSP allows diasbled Canadians to have a savings plan for retirement
» Matching amount from the federal government
dollar the applicant puts into the RDSP, the federal government will match it with up to $3 with what is known as a
Canada Disability Savings Grant. This is assuming your household income is below the maximum
level of $87,123.
» Eligibility for a $1,000 grant
Low-income applicants may
be eligible for a $1,000 grant annually for 20 years, known as the Canada Disability Savings Bond. Mid-income
families (those with incomes between $25,356 and $43,561 may still qualify for a partial bond.
» Good return on investment
The RDSP is one of the best returns on investment available. In addition, the RDSP is exempt
from most provincial disability benefits. In other words, the balance in your RDSP account is not held against
you in terms of your eligibility for benefits under provincial law. Finally, there is no limit on what you can
do with the money when you withdraw it. It’s your money to do with what you please.
» The Disability Tax Credit
To be eligible to apply for an
RDSP, you must be less than 60 years of age. You need to first qualify for the Disability Tax Credit and the Canada Child Tax Benefit (if you have dependent children
under the age of 19). Essentially, The Disability Tax Credit reduces your taxes in recognition of your
disability. Although this does reduce the amount of taxes you pay, it is non-refundable meaning that you will
not get any extra money back on your tax refund because of it.
» Choose a Holder for your RDSP
You’ll also need to
designate a Holder for your RDSP. This person will manage your plan and make decisions about investments, payouts
etc. In most cases, the Holder will be you. As long as you are an adult are competent in making such contractual
decisions, you are considered the Holder unless you appoint someone else. If your financial institution feels that
you are not able to manage your financial affairs, they may ask that you have a legal representative manage your
account for you.
» Making contributions to your RDSP
Although most people
contribute to their own RDSP, it is possible for anyone to contribute to your account, provided they have your
written permission. Contributions to your RDSP from other people are subject to the same government matching grants
as contributions you make yourself.
If you are a Canadian with disability, you may be eligible to open an RDSP. It’s by far one of the best ways to
save for retirement if you are a disabled Canadian. There are many benefits to saving money this way, and it’s
worth looking into. Ask your financial planner for more details and information about Registered Disability Savings Plan.