There are no limits on when you can take funds out of an RDSP or how you spend the money. Every dollar you withdraw will come from three sources:
- Contributions you or others made to the RDSP
- Government grants or bonds
- Money you made investing the funds in your RDSP.
Tip: If you withdraw funds before they have been in the plan for at least 10 years, you must repay any grants and bonds you receive to the government.
Payments can be made to:
- the beneficiary (called a disability assistance payment)
- the beneficiary's estate (after the death of the beneficiary).
The beneficiary must begin receiving regular payments from the plan by the end of the year he or she turns age 60. Once regular payments start, they will continue for the life of the beneficiary. Payments do not affect eligibility for federal government benefits such as the HST credit and the Canada Child Tax Benefit. The beneficiary can also withdraw money from an RDSP without affecting their provincial disability benefits.
Tip: When a beneficiary withdraws money from an RDSP, they will pay tax on the portion of government grants, bonds and investment growth they earned through investing the money in their RDSP. There is no tax on RDSP contributions when the beneficiary withdraws them from an RDSP.
Remember: A beneficiary can take money out of his or her RDSP at any age
But you are supposed to wait at least 10 years before you start. If you take money out early, you will have to repay these funds to the government.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.