In my previous posts, I’ve talked about three different types of government savings plans:
Today I’m going to talk about a savings plan not a lot of people are familiar with – a Registered Disability Savings Plan.
What is an RSDP?
A registered disability savings plan or RDSP is a savings plan for parents and others (e.g. grandparents, aunts and uncles, etc.) that is intended to provide anyone who is eligible for the disability tax credit with long-term financial security. A beneficiary can only have ONE RDSP at any given time.
Who is eligible to be the beneficiary of an RDSP?
The following criteria must be met in order for someone to be the beneficiary of an RDSP. They must:
- Have a valid social insurance number
- Be eligible for the disability tax credit (DTC)
- Be a resident of Canada when the plan is opened
- Be under the age of 60
To be eligible for the disability tax credit, a qualified medical practitioner must have filed in Form 2201 Disability Tax Credit Certificate and the government must have approved it.
How do contributions and government matching work?
There is no yearly maximum for RDSP contributions, but there is a lifetime maximum contribution of $200,000. And the government will match your contributions up to a certain amount, depending on your household income. If your income is low enough, they will give you a contribution via a bond even if you have made no contribution.
Canada Disability Savings Grant
If your family income is $97,069 or less:
- on the first $500 contribution—$3 grant for every 1 dollar contributed, up to $1,500 a year
- on the next $1,000 contribution—$2 grant for every 1 dollar contributed, up to $2,000 a year
If your family income is more than $97,069:
- on the first $1,000 contribution—$1 grant for every 1 dollar contributed, up to $1,000 a year
Canada Disability Savings Bond
The Government will pay a bond of up to $1,000 into an RDSP – even if you haven’t made any contributions! No contributions have to be made to get the bond. The amount the government contributes will be based on the beneficiary’s adjusted family net income as follows:
- $31,711 or less — Bond $1,000
- between $31,711 and $48,535— Part of the $1,000 is based on the formula in the Canada Disability Savings Act
- more than $48,535—No bond is paid
RDSPs are a great savings vehicle
With the government providing a match to your contributions – or even a bond if you make no contribution, but have a low income, RDSPs are a great savings vehicle! Do you know anyone who has an RDSP or is contributing to one?
