RDSP Basecamp: Learning the Basics of an RDSP and How It Can Help You

Sometimes I ask myself, “Are our clients utilizing all the savings plans offered by our government?”  For example, one type of government savings plan is the RDSP or Registered Disability Savings Plan.  It is a long-term plan designed to help individuals (i.e. beneficiaries) with disabilities and their families to save for the future.

To qualify for opening an RDSP, a beneficiary must:

• Be a Canadian resident
• Have Disability Tax Credit (DTC) eligibility
• Hold a valid Social Insurance Number (SIN)
• Be under 60 years old at the time of account opening

Here are some of the advantages for setting up an RDSP for a qualifying beneficiary:

• The government pays out matching grants (Disability Savings Grant, or DSG) for contributions made into the plan.
• If the beneficiary qualifies, they can also receive additional bonds (Disability Savings Bond, or DSB) from the government.
• Contributions can be invested in the RDSP and grow tax-deferred until the beneficiary starts to withdraw from the plan.  Essentially the growth portion, matching grants and bonds are taxed as the beneficiary’s income at the time of withdrawal. The original contribution portion of the plan is not taxable.

How do matching grants and bonds work?

At the time of opening the RDSP, your Financial Advisor and financial institution will help you apply for the DSG and DSB from the government.  DSGs are paid by the government for contributions made to the RDSP.  These are paid into the RDSP every year up until the year the beneficiary turns 49, or up to a lifetime maximum amount of $70,000.  The government will pay out a maximum DSG of $3,500 per year for annual contributions.

DSBs are paid out to beneficiaries with qualifying low to modest income.  No contributions need to be made into the RDSP to receive DSBs. The maximum yearly amount of DSB a beneficiary can receive is $1,000, up to a lifetime maximum of $20,000.  The lifetime maximum for contributing to the RDSP is $200,000.  Anyone can contribute to the RDSP with the permission of the holder (i.e. the person who sets up and manages the RDSP).

In some cases, both the holder and the beneficiary are the same person.

If you would like to learn more about RDSPs, please feel free to reach out to your trusted Financial Advisor at RGF Integrated Wealth Management.

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