Do you currently receive the disability tax credit? Maybe you’re the caregiver for someone who does.
If so, you may be eligible to open a Registered Disability Savings Plan (RDSP) to support your (or your loved one’s) financial health.
“An RDSP helps Canadians with disabilities achieve long-term financial security,” says Pauline Kupiak, Wealth Solutions Advisor at Cambrian and Aviso Wealth. “It provides grant and bond funding from the government of Canada.”
With an RDSP, you can benefit from:
If you receive the Disability Tax Credit and are under the age of 60, you’re eligible to open an RDSP!
Here’s what you need to know:
The RDSP is designed to help Canadians with disabilities secure their financial future. It offers significant grant and bond benefits, along with tax-deferred growth for investments within your plan.
“If the person with a disability is under the age of 18, the parent or primary caregiver will be the account holder,” says Pauline.
A qualifying family member can open an RDSP on someone’s behalf if the individual is unable to.
To open an account, you must be:
The disability tax credit reduces the income tax for people with disabilities. To open an RDSP, you must first quality for this tax credit.
No, money contributed to your account is not tax deductible. However, any investments you hold within your plan can grow tax-free while money remains in the plan.
The amount you receive from government grants and bonds depends on a few factors, like how much you contribute to your RDSP and your family’s income.
Here’s how each one works:
The CDSG funding you receive is based on:
Through the CDSG, you can get up to $3,500 matched each year, for a lifetime maximum of $70,000. You can receive grant contributions until you turn 49.
Unlike the grant funding, you don’t have to contribute to your RDSP to receive bond funding. Canadians with disabilities can receive up to $1,000 per year through this bond.
You receive CDSB based on your family’s net income.
If it’s over $53,359, you’re not eligible to receive CDSB funding. But if it’s between $34,863 and $53,359, you can receive up to $1,000 annually.
The purpose of the RDSP is long term financial growth, so making early withdrawals comes at a cost.
In general, you may need to repay a portion of grant and bond funds if you take money out of your RDSP that’s been in your plan for less than 10 years.
There are exceptions if the RDSP account holder has a life expectancy of 5 years or less.
To avoid having to repay bond and grant money, consider the following rules before withdrawing from your RDSP:
In some circumstances, you may need to return all grant and bond funding contributed by the government in the 10 years before the withdrawal.
These circumstances include:
If you’re making a withdrawal from your RDSP, the proportional repayment rule may apply. It states that for every $1 you withdraw, you must repay $3 of grant or bond funding that was paid into your plan in the preceding 10 years.
While each rule has its own set of restrictions, in general, aim to leave money in your RDSP for 10 years before making withdrawals. Otherwise, it’s likely you’ll need to repay a portion of any grant or bond money you received.
“An RDSP is a long-term savings strategy, which makes it ideal for investing,” says Pauline.
Remember: Time in the market always beats trying to time the market!
The longer you leave your money invested, the more time you have to take advantage of compound interest.
At Cambrian, we partner with Aviso Wealth to provide a diversified lineup of Responsible Investing mutual funds to our members. If you’d like to work with one of our Wealth Solutions Advisors, we’re here to help. Learn more about investing with Cambrian today.
Interested in opening an account for yourself or someone in your care who may be eligible?
“You can open an RDSP through our Wealth Solutions Centre!” says Pauline.
We can help you get started on your long-term savings plan - Book a meeting with a Wealth Solutions Advisor to learn more.
Disclaimer
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.
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