Learn more about the RDSP
What is a Registered Disability Savings Plan (RDSP)
- Created by the federal government, the RDSP provides people with disabilities with an easy and effective way to save for their long-term financial security.
Key Features of the RDSP
- There is no annual contribution limit, but there is a lifetime limit of $200,000 for total contributions. Contributions can be made up until the end of the year the beneficiary turns 59. Investment income and capital gains remain tax-deferred while in the RDSP. Contributions are not tax-deductible.
- As a registered savings plan, earnings grow tax-free until money is withdrawn. This means RDSP contributions can grow faster, helping to accumulate more in the plan.
- Contributions may be eligible for the Canada Disability Savings Grant (CDSG), which provides matching contributions of up to $3,500 annually until the end of the year the beneficiary turns 49 ($70,000 lifetime limit).
- The plan may also be eligible for the Canada Disability Savings Bond (CDSB), which pays up to $1,000 annually until the end of the year the beneficiary turns 49 to low-income families regardless of whether RDSP contributions are made ($20,000 lifetime limit).
- Withdrawals can be used for any purpose, as long as it is for the benefit of the person with the disability (the plan's beneficiary).
- Income payments from RDSPs do not affect income-tested federal government programs, including Old Age Security, the Guaranteed Income Supplement and the Canada Pension Plan. In most provinces and territories, you will still qualify for existing provincial social assistance programs if you have an RDSP.
- The beneficiary must begin receiving payments from the plan by the end of the year he/she turns 60.
- The beneficiary can only have one RDSP.
Who can take advantage of an RDSP?
Anyone who is eligible for the Disability Tax Credit may be the beneficiary of an RDSP. To qualify, the beneficiary must:
- Be a Canadian resident.
- Have a valid Social Insurance Number.
- Be under the age of 60.
- Complete a Disability Tax Credit Certificate (Canada Revenue Agency Form T2201) with the assistance of a qualified practitioner and receive notification of approval from the Canada Revenue Agency.
- Anyone can contribute to an RDSP as long as they have written permission from the account holder.
- There is no annual limit on contributions and the lifetime maximum is $200,000. However, contributions must cease by the end of the year in which the beneficiary reaches age 59, no longer lives in Canada, no longer qualifies for the Disability Tax Credit, or when the beneficiary dies. Consider making automatic RDSP contributions at regular intervals throughout the year – you will find it easier on your budget and a convenient way to reach your target annual contribution amount before the December 31st deadline each year. Keep in mind that the sooner your money is invested in an RDSP, the longer it has to grow tax-deferred.