Updated June 2023. The Registered Disability Savings Plan (RDSP) is a long-term savings plan specifically designed to help individuals with disabilities and their families save for the future. Introduced by the Canadian government in 2008, the RDSP aims to provide financial security and support for individuals with disabilities over their lifetimes.
Here are some key features and benefits of the RDSP:
- Savings and Investment: The RDSP allows individuals to contribute funds into a tax-deferred savings account. Contributions can be made by the beneficiary, their family members, or any other eligible contributors. The savings can then be invested in a variety of investment options such as mutual funds, bonds, and stocks, depending on the financial institution offering the RDSP.
- Government Grants and Bonds: One of the primary advantages of the RDSP is that the Canadian government provides financial incentives in the form of grants and bonds to help boost the savings. These incentives include the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB).
- Canada Disability Savings Grant (CDSG): The CDSG matches contributions made to the RDSP, with the matching rate depending on the beneficiary’s family income and contribution level. The grant can be received up to a lifetime maximum of $70,000.
- Canada Disability Savings Bond (CDSB): The CDSB is available for individuals with lower family incomes. It provides a fixed amount of money annually into the RDSP, even if no contributions are made. The lifetime maximum for the CDSB is $20,000.
- Tax Advantages: Contributions made to an RDSP are not tax-deductible, but the investment growth within the plan is tax-deferred. Withdrawals from the RDSP are considered taxable income for the beneficiary, typically at a lower tax rate due to their potentially lower income level. Additionally, the government grants and bonds received do not count as income until they are withdrawn.
- Flexibility in Withdrawals: RDSP funds can be used for various disability-related expenses and financial needs. These can include medical and dental expenses, education and training, housing, transportation, and other essential supports. The flexibility in how the funds are used allows individuals to address their specific needs and improve their quality of life.
- Lifetime Limit and Age Restrictions: The lifetime limit for RDSP contributions is $200,000. The plan is designed to support individuals with disabilities over the long term, and contributions can be made until the end of the year in which the beneficiary turns 59. However, government grants and bonds have an annual limit and eligibility requirements.
To open an RDSP, the beneficiary must have a valid Social Insurance Number (SIN) and be eligible for the Disability Tax Credit (DTC).