The RDSP is a government savings plan that helps people with disabilities and their families save for the future. Over the years, you put money into the plan and invest it so it will grow. You pay any tax owing on the money you contribute. But you do not pay tax on the money you make investing your savings as long as it stays in the plan.
People who are age 49 and under may also qualify for government money. If you qualify, there are two funding programs for RDSPs:
- the Canada Disability Savings Grant
- the Canada Disability Savings Bond.
With the Savings Bond program, you don’t even have to contribute a cent of your own money. If your net family income is less than $21,947 a year, you will receive a $1,000 bond automatically!
Who can receive money from an RDSP?
The person who receives the benefits of an RDSP is called the beneficiary. You can be a beneficiary if you:
- are a Canadian resident under age 60
- qualify for the Disability Tax Credit ( Disability Amount)
- have a Social Insurance Number (SIN)
- are a resident of Canada at the time the plan is opened.
In most provinces, you can withdraw as much money as you want from an RDSP without affecting your disability benefits. With other savings plans, this is not always the case.
Tip: A beneficiary can have only one RDSP at any given time. In some cases, a beneficiary can open their own plan. In other cases – for example, a child – someone else will open the plan and manage it for them. The person who opens the RDSP is called the plan holder.
Why would I choose an RDSP?
- You save more than you would on your own. The government grants can really add up over the years. This means extra financial security for the person with disabilities and peace of mind for their families.
- You can invest the money anyway you choose. The money you make investing grows tax-free as long as you leave it in your RDSP.
- People can have an RDSP and still get provincial disability benefits. In most provinces you can withdraw money as much as you want from your plan without affecting your disability benefits. With other savings plans, this is not always the case.
What will it cost to have an RDSP?
Some financial institutions do not charge fees for your RDSP, while others might. Before you open a plan, ask if there is an administration fee, a set-up fee or a management fee.
Tip: You are allowed to move your RDSP from one financial institution to another for any reason. But, you might have to pay to do this. The fees vary from institution to institution.
Remember: An RDSP can be an important part of a financial plan for people with disabilities.
Through the RDSP program, the hope is that we may see a major drop in poverty among people with disabilities in Canada. It’s the first plan of its kind in the world. If you have a trusted advisor, ask him to explain how an RDSP might fit into your financial plan.
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.