Saving for the future just got easier for Canadians with
disabilities.
A program called the Registered Disability Savings Plan
(RDSP) helps eligible people with severe and prolonged disabilities, their
families and others save for their future financial security. RDSPs allow
tax-deferred growth of contributions – much like a Registered Retirement Savings Plan (RRSPs) – up to a lifetime
maximum contribution of $200,000 with no annual limit.
All Canadians under the age of 60 who qualify for the
Disability Tax Credit are eligible to set up an RDSP. If the person is a minor,
their parent or legal guardian may establish the RDSP for them.
Qualifying for grants and bonds
In addition to the plan’s tax benefits, the government also
offers generous grants of up to $3,500 per year and a bond of up to $1,000 for
low to mid-income families.
The grants require a contribution and are income-tested. For
families with an annual income under $77,664, the grant recipient receives $3
for every $1 contributed on the first $500 and $2 for every dollar on the next
$1,000. This means a contribution of $600 earns the grant recipient $1,700. If
household income is above $77,664, the government matches contributions dollar
for dollar up to a $1,000 maximum. The lifetime grant limit is $70,000.
In addition to grants, RDSP recipients with a family income
under $21,816 can qualify for a bond of $1,000 for just opening the account. The
lifetime bond limit is $20,000.
Withdrawals from the RDSP can be made at anytime and include
a blend of taxable and non-taxable amounts. Contributions are not taxed as
income when paid out of an RDSP. However, investment income, capital gains, and
all bond and grant amounts in the plan are taxed as income in the hands of the
beneficiary. Because the plan is intended to encourage long-term savings, any
bond or grant amounts withdrawn within 10 years of being paid into the plan
must be repaid. So, it makes good financial sense to keep this money growing
tax-deferred for as long as possible.
How to start an RDSP
There are a few qualifications the beneficiary must meet to
be eligible for the RDSP. The Planned Lifetime Advocacy Network (PLAN), a non-profit organization aimed to help families and those with disabilities, offer these RDSP qualification steps:
- Make sure you or your relative qualify for the Disability
Tax Credit.
- Be a Canadian Resident and have a valid Social Insurance
Number.
- Be under 60 years of age.
- If your child is under age 18, make sure you sign up for
the Canada Child Tax Benefit.
- File a tax return for two years prior, to receive the
Grant and Bond.
After completing these steps, you can set up an RDSP with
any Canadian financial institution that offers the plan. The deadline for making
an RDSP contribution and applying for any grants and bonds for a given year is December 31st.
For more information on RDSPs, Canada Disability Savings
Grants (CDSG), and the Canada Disability Savings Bond (CDSB), see Human Resources and Skills Development Canada and Canada Revenue Agency.
Who sets the age limit for something like this and why 60.
I turned 60 on the 15th of September and have been disabled since I was 40. Now is a great time to bring something like this out. Missed by two weeks.
Posted by: Desmond | 10/02/2009 at 05:20 AM
You didn't miss it by 2 weeks. It has been out for some time now. Your advisor should have mentioned it to you. If you don't have an advisor, you are missing out on all kinds of things
Posted by: jbd | 10/02/2009 at 09:41 AM
I just turned 62, and have been disabled since 59 and qualified for the disability tax credit.wonder whats the criteria to set the age at 6o to qualify and who sets that age limit. a disabled person is a dis abled person no matter what his /her age. very selective and poor communication to the public in general especially for those who are disabled.
Posted by: william bryanne | 10/02/2009 at 09:46 AM
I'm 41 years old and receive a disability pension from the government. How do I know if I am eligible for a disability tax credit?
Posted by: Susan | 10/02/2009 at 11:48 AM
I am just about fifty and am on the AISH and Disability tax program.Do I still qualify for the RDSP?
Posted by: Shannon | 10/02/2009 at 01:26 PM
@Susan The Canada Revenue Agency offers these questions to find out if you might be able to claim the disability amount (also known as the Disability Tax Credit).
Posted by: Kerry K. Taylor | 10/02/2009 at 02:20 PM
Having a disability for several years is there any provision for back time or bankrupcy assistance.
Posted by: george lessard | 10/02/2009 at 04:16 PM
Unfortunately there is very cruel wrinkle to RDSPs. If you are 48 years old now and RDSPs just started, you can still contribute to RDSPs but after age age 49 the gov't WILL NOT match your contributions, and it WILL NOT deposit the $1000 bond.
SO MUCH for helping older adults people with disabilities like people with MS who have long lived near or below the poverty line on ODSP get a helping hand in their senior years.
Write your MP now and demand this rule be changed.
Posted by: wmroche | 10/02/2009 at 10:40 PM
I have been disabled since 1984,and believe me its been a rough road in all ways, but now those of us past 60 years of age are discriminated against,the cost of daily life does not change wih age, if this is set up to help those with disabilites then age should not be a mark against,,this needs to be revamped and to be inclusive to all who meet the disability critera regardless of age..
Posted by: Grace Kelloway | 10/02/2009 at 11:25 PM
For the past 7 years, I have a totally disabled husband who is over 60... besides the age discrimination - which disabled person is fortunate enough to have enough extra $$ to put into an RDSP? We're lucky to pay our bills never mind put $$ into a SAVINGS account.
Posted by: kt | 10/03/2009 at 01:03 AM
This plan can be a wonderful benefit to families with young children with disabilities where parents can start to put money into the account for them early on. It also does not affect ODSP so thats nice. Because people can collect CPP disability pension etc I guess thats why it only goes to age 60.
I am the parent of a 33 year old man with cognitive disability. He works part time and has little money. He does not want ODSP because he feels it stigmatizes him. But the other problem is I can contribute the $1500 needed to qualify him for the government top up but I can't declare it as an expense on my income tax. As I am due to retire soon that would have been nice. The rebate could have gone back into his RDSP or my RSP. And trying to get this set up in the bank? Good thing I speak English. An expert in all of this is Graeme Treeby who does public workshops for free. Call your local support agency for info or go online
Posted by: Linda | 10/03/2009 at 11:43 AM
This current government has shown compassion for our disabled. Although it is not perfect it is a positve step in the right direction. Let's look at it as a pioneering movement aimed toward our most vulnerable to give consistency and a quality of life to them. I stress although the interpretation financially is not perfect across the board it pioneer's new support to the disabled.
Posted by: Michael G Lemmermeyer | 10/03/2009 at 06:12 PM
I'm a 39 year old man with NLD and AS (Asperger's Syndrome). I've been on ODSP now for 5 years and I didn't know about my disabilities until age 30.
But.. ANYWAYS... I'm eligible for the DTC and I'm also gonna look into the RDSP.
Posted by: Frank | 10/04/2009 at 12:11 AM
I am 49 and have been collecting ODSP since late 2006. I am trying to find work but it is a nightmare so I am planning ahead for my retirment to make sure I don't starve to death by then should I not find work. My primary question is: what happens to my ODSP when I turn 65?
I know I will get approx. $675 om CPP and OAP total each month if I do not find a job before then, but what happens to my ODSP payment? Does it stop because I can apply for a Canada Disability Pension of some kind? Or is one separate from the other?
Also, what is a disability tax credit? I have my taxes done professionally so is this being taken into account already? I never looked on my statement.
Thank you.
Posted by: Kitty | 10/13/2009 at 11:42 AM
I'm 47 and suffer from Lupus for some 15 years, I'm considered to be disabled. How do I know if I qualify for these type of benefits? Is there a place I should have registered my disability?
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Posted by: Conner | 12/15/2009 at 06:15 AM
If the RDSP is set up correctly, $20,000 spread out over 20 years one can get the $90,000 in bonds and grants.
First an annuity must be bought, $20,000 will pay out about $30,000 over twenty years. Grants and bonds will be added to this amount ($90,000). Assuming a 3% rate of return in 20 years one has about $164,000.
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Posted by: Antony | 02/12/2010 at 04:14 AM
An RDSP is not always the greatest savings vehicle for Canadians with Disabilities.
A TFSA may work much better. These comparisons are heavily affected by the tax rate at which the gains are taxed at.
Some CFPs will sell their clients any product that sounds good without doing the analysis.
An RDSP is great if you have maxed out your TFSA and RRSP contribution rooms and are looking to set up a fund for a disabled relative or friend.
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