How do you get your money out?
When you take money out of your RDSP, you can use it for anything you want, but there are some very important rules you need to be aware of.There are 2 ways in which a beneficiary can withdraw funds:
- Annual Withdrawals
- Annual withdrawals, or Lifetime Disability Assistance Payments (LDAPs), must begin by the end of the year in which the beneficiary turns 60. These annual payments will then continue for the life of the beneficiary. However, you can take one-off payments or start regular income at any age.
- One Time Withdrawal
- This form of withdrawal is known as a Disability Assistance Payment (DAP) and can be paid to the beneficiary at any time after the RDSP is established.
- If you receive a federal government grant of bond, there is a “holdback period” of 10 years from the year of the last federal contribution, because the plan is intended to encourage long-term savings.
- Up until last year, ifyou made a withdrawal from the plan during that period, you would have had to pay back all funds received from the federal government in the past 10 years. As of January 2014 however, this rule has changed to a “proportional repayment rule” so that for each $1 withdrawn from an RDSP, only $3. Of any grants or bonds paid into the plan in the 10 years will need to be repaid.
- If the federal government contributed more to your RDSP than you (and your family and friends) did, then you can withdraw a limited amount in one year. This is either the money in your RDSP divided by the number of years before you turn 83, or 10% of the amount in the plan per year.
- Withdrawals include a blend of taxable and non-taxable amounts. Contributions are not included as taxable income when paid out of an RDSP. However, investment income and capital gains plus any Grant and Bond amounts in the plan are included in the beneficiary's income for tax purposes when paid out of the RDSP.
- Withdrawals from the RDSP are exempt from most provincial disability and income assistance benefits. The government will not claw this money back.