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The last of the seven eternal truths of personal finance that ran in the Financial Post in June was “Don’t say no to free money from the government.” After it ran, I heard from a spokesperson for the federal government’s Ministry of State for Social Development. He pointed out that it might have been appropriate to mention the RDSP or Registered Disability Savings Plan, which helps families with disabled family members save in a tax-efficient manner. I agreed it was an omission and offered to run the guest blog that follows. — JC
By Candice Bergen,
Special to the Financial Independence Hub
If you have a disability or if you have a child with a disability, you should know about the Registered Disability Savings Plan (RDSP).
The purpose of the plan is to help Canadians with disabilities and their families to save for the future. The federal government also provides generous grants and bonds to help with long-term savings if eligible.
Across Canada, approximately 100,000 people are already benefiting from the program; however, estimates show that there are still more than 400,000 people who are eligible but have yet to take advantage of this plan. That’s unfortunate because it’s very easy to set up an account. In fact, all you need is a Social Insurance Number, be a Canadian resident and qualify for the Disability Tax Credit.
Once an RDSP is set up, anyone—friends or family included—can contribute to it. You can open a RDSP at a participating financial institution, such as a bank or credit union.
You can contribute as much as you want to a RDSP each year, up to a lifetime limit of $200,000. The earnings from the Plan build tax-free until taken out of the plan.
Ottawa supplements RDSP in two ways
As mentioned, the federal government will supplement the RDSP in two ways: the Canada Disability Savings Bond and the Canada Disability Savings Grant.
The Grant, encourages families to save for their child’s future. Every dollar you contribute is matched by three from the Government up to $3,500 per year and $70,000 in total.
The Bond, is designed for families and individuals of modest means who may not be able to contribute themselves. For those with incomes of approximately $25,000 or less, the Government will put $1,000 a year into their RDSP up to a maximum of $20,000 in total.
My department, Employment and Social Development Canada, has a great RDSP Savings Calculator that can help you anticipate how money contributed to an RDSP Rwill grow over time by calculating the amount of Grant and Bond you could receive. (Or try here.)
Now, if you haven’t signed up yet, don’t worry but don’t delay! As long as the person who will benefit from the RDSP is under 49, they can receive any money they may have missed out on since the program started in 2008. The sooner you open a plan, the more you can benefit.
Also, RDSP payments will not reduce any federal benefits they may already receive including the Child Tax Benefit, the enhanced Universal Child Care Benefit and the Guaranteed Income Supplement.
I hope that you found this information helpful. If you think you or someone you know may qualify, check it out! For more information, there is more on our website.
Candice Bergen is the Minister of State for Social Development in Prime Minister Stephen Harper’s cabinet
