Disability Savings Plans

Posted 06 Jun 2014 by Melissa Allan

Registered Disability Savings Plans, or RDSPs, were introduced by our federal government in 2008 and the benefits are just too great to ignore. They were designed to help people with disabilities save for their future and offer wonderful government incentives.

In order to be eligible to open an RDSP, you must be eligible for the disability tax credit, be a Canadian citizen, have a valid Social Insurance Number, and be under the age of 60.

The main advantages are as follows:

  • Contributions grow tax-free until the money is taken out of the plan
  • These plans may be eligible for government incentives in the form of grants up to $3,500 annually with a $70,000 maximum lifetime grant amount
  • When it comes time to take the money out of these plans, income payment do not affect other government programs such as OAS, CPP, GIS, and other social assistance programs

Eligibility for grants is income-tested every year. However, when looking at family income, the government looks at net income from 2 years prior. So a contribution made in 2013 would be based on the 2011 family income. Once the plan is open, owners will receive an annual letter which breaks down the maximum contribution they can make and the maximum grant they will receive to help individuals utilize this program and take advantage of catch up grants.

For example, if a family has a net income of less than $75,000 they could contribute as little as $125 a month and receive up to $3,500 in an annual grant. This could certainly add up to a lot of money over time.