Monday, 30 January 2012

Building financial security for Canadians with disabilities

Registered Disability Savings Plans

Why RDSPs are the best way to save
1. Anyone can contribute to an RDSP with the written consent of the account holder
2. The total lifetime contribution for each beneficiary is $200,000, with no annual contribution limits
3. Contributions can be matched, based on family income, with up to $3,500 a year in Canada Disability Savings Grants and up to $1,000 a year in Canada Disability Savings Bonds
4. The money you contribute grows tax free
5. Savings and withdrawals do not affect federal and provincial income-tested benefits

Who qualifies for an RDSP?
You qualify to be an RDSP beneficiary if you are eligible for the Disability Tax Credit, a resident of Canada, less than age 60 and have a valid Social Insurance Number.

How to open an RDSP account
• If you haven’t already, apply for the Disability Tax Credit (see
• See your financial advisor to open an RDSP

Take advantage of Government help
Canada Disability Savings Grant - Through the CDSG, the Government deposits money into your RDSP to help you save, providing matching grants of 300%, 200% or 100%, depending on the amount contributed and the beneficiary’s family net income. The maximum is $3,500 each year, with a lifetime limit of $70,000.
Canada Disability Savings Bond - Through the CDSB, the Government deposits
money into the RDSPs of low-income and modest-income Canadians. If you qualify for the
bond, you could receive up to $1,000 a year, with a lifetime limit of $20,000.

Withdrawing your money
RDSP withdrawals must begin by the end of the year you turn age 60. You may withdraw funds earlier, but be sure to note that once a withdrawal of any amount is made, all federal grants and bonds paid into the RDSP in the previous 10 years have to be repaid.  Withdrawals will consist of non-taxable contributions, taxable Government monies and taxable growth.

How your money can grow: an example
Jack, whose family income is less than $21,287 a year, opens an RDSP at age 19 and contributes $1,500 a year until he is age 49, investing the money in a balanced mutual fund that returns 5.5% annually. Even though his annual contributions only total $46,500 ($1,500 x 31 years), when those contributions are combined with Canada Disability Savings Grants and Canada Disability Savings Bonds, by age 50 Jack will have accumulated $398,891.

• Your annual contribution of $1,500 = $46,500 total
• CDSB of $1,000 a year to a maximum lifetime amount of $20,000
• CDSG of $3,500 a year to a maximum lifetime amount of $70,000
• Results in $398,891 plan total

Top 3 tips to maximize savings
1. Start saving early. Make it automatic by enrolling in a pre-authorized chequing program.
2. Contribute every year to get the maximum annual Canada Disability Savings Grant and Canada Disability Savings Bond, if applicable.
3. Plan your withdrawals to avoid federal grant and bond repayments.

To open an RDSP, please talk to your financial advisor.  If you know of someone who could qualify, be sure to send them this article.

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