You deserve the tools that truly support your goals. If you or someone you care for lives with a disability, either visible or invisible, a Registered Disability Savings Plan (RDSP) can be a powerful tool to provide long-term stability. Unlike regular savings accounts, an RDSP is a disability savings plan to help parents, guardians, or individuals save for the future well-being of a person with a disability.
At Mainstreet Credit Union, we understand planning for the future can feel overwhelming. That’s why we are here to make it easier, offering personalized advice and flexible solutions. In this blog, you’ll learn how an RDSP works, who can open one and how to maximize government contributions and bonds to make the most of your savings.
- How do RDSPs work?
- Who Can Open an RDSP
- Am I Eligible for Government Grants and Bonds?
- How Will an RDSP Affect My Ontario Disability Support Program?
- How do Withdrawals Work?
- How Can I Set up an RDSP?
How Do RDSPs Work?
A Registered Disability Savings Plan (RDSP) helps you save for the future while allowing you to invest up to $200,000 over the lifetime of the plan on a tax-deferred basis. This means any investment growth inside your RDSP account isn’t taxed until the funds are withdrawn.
Contributions can be made by you, family members, friends, or others with the plan holder’s written permission. This contribution flexibility makes RDSP contributions a team effort in order to secure financial stability for the beneficiary.
In addition to your individual contributions, the Government of Canada also has two powerful incentives:
- The Canada Disability Savings Grant (CDSG): The Canadian government matches between 100% and 300% of your annual contributions, depending on family income, up to a maximum of $3,500 per year and $70,000 lifetime.
- The Canada Disability Savings Bond (CDSB): For low and modest-income families, the government may contribute up to $1,000 per year to your RDSP — even if you don’t make any personal contributions — to a maximum of $20,000 lifetime.
Simply opening an RDSP account may qualify you for these benefits. Our Mainstreet Aviso Wealth Advisors are here to make sure you can maximize your RDSP and take full advantage of your contributions and Government Incentives. We make the process easy and seamless so you can focus on what matters most.
Who Can Open an RDSP?
To open an RDSP, the beneficiary must meet these requirements:
- Qualify for the Disability Tax Credit (DTC)
- Be a Canadian resident at the time the RDSP is opened
- Have a valid Social Insurance Number (SIN)
- Be under age 60 (unless transferring from another RDSP)
If the beneficiary is below the age of 18, a parent or legal guardian can open and manage the RDSP on their behalf.
At Mainstreet, we make opening an RDSP account simple and stress-free. Our advisors are there to help you choose the right investment options for your needs. We’re here to ensure your disability savings plan works for you in the way you prefer.
Am I Eligible for Government Grants and Bonds?
To qualify for the CDSG or CDSB payments, the beneficiary must:
- Be under 49 years old
- Be a Canadian resident
- Have a Social Insurance Number (SIN)
- Be eligible for the Disability Tax Credit (DTC)
- Have up-to-date income tax returns filed
- For beneficiaries under 18, parents or guardians must have filed their tax returns for the past two years and continue to do so annually.
If you meet the criteria, you can access valuable government contributions that can significantly boost your RDSP account. In combination with your own contributions, these grants and bonds can make a meaningful difference in your long-term financial security.
How will an RDSP affect my Ontario Disability Support Program?
One common concern is whether an RDSP will impact your Ontario Disability Support Program (ODSP) benefits. The good news? Currently, RDSP payments do not affect ODSP eligibility or the amount of income support you receive.
Our Aviso and Mainstreet Wealth Advisors are here to guide you through these rules to ensure your plan works seamlessly in combination with other support programs.
How Do Withdrawals Work?
Withdrawals from an RDSP are designed to provide long-term benefit. When you are ready to withdraw from your RDSP, there are two main types of payments:
- Disability Assistance Payments (DAPs): Flexible withdrawals and can be taken out as they are needed.
- Lifetime Disability Assistance Payments (LDAPs): LDAPs are regular, ongoing payments that must begin by the end of the year the beneficiary turns 60.
The withdrawn funds can include both personal contributions and government grants or bonds. However, only the government and investment growth portions are taxable income for the beneficiary.
It is important to know the rules: if withdrawals made within 10 years of receiving government contributions, some grants and bonds may need to be repaid. These guidelines are here to ensure your disability savings plan remains focused on your long-term security while offering flexibility.
Our advisors will work with you to create a withdrawal strategy that works for you and your lifestyle.
How Can I Set Up an RDSP?
Are you ready to set up an RDSP for someone you care about? Setting up an RDSP account is easier than you might think. Our Mainstreet and Aviso Wealth advisors are here to guide you every step of the way, provide personalized advice—from opening your account to creating automatic RDSP contributions that help you maximize the government grants and bonds.
Book an appointment today and let us help build a strong disability savings plan for yourself or someone you care about.
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax, or similar matters.