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Planning for the Future

Due to be released December 2008, the new Registered Disability Savings Plan (RDSP) will allow people with disabilities to save for their financial future.

The RDSP will allow money to be invested without being taxed until it is withdrawal. The plan structure is similar to the Registered Education Savings Plan (RESP).

Much like the RESP, the federal government will provide matching contributions in Canada Disability Savings Grants (CDSGs) depending on the amount you contribute and your household income - up to a maximum lifetime CDSG limit of $70,000.

For the first $500 contributed to the plan, the government will match with contributions totaling 300% for a total of $1,500. For the next $1,000 of contributions, the government will match 200% for an added amount of $2,000. This means that, for your annual personal contribution of $1,500, the government will contribute an additional $3,500.

In other words, by the end of the year, you will be able to invest $5,000 towards your retirement. You can contribute more than $1,500 a year. There is no annual maximum. A lifetime annual maximum contribution of $200,000 is allowed.

The federal government is also creating a Canadian Disability Savings Bond (CDSB) which will provide up to $1,000 a year to people whose household incomes are under $20,883. If you earn less than $37,178, you could receive up to $500 for opening a plan. This bond could be received annually up to a maximum lifetime contribution of $20,000. So, if you earn under $20,883 then, for $125 a month ($1,500 a year), you can accumulate $6,000 in your RDSP at the end of the year.

Contributions to a person’s RDSP can be made by themselves, their friends, or their family.  The contributions are not tax deductible. However, the earnings generated on contributions are tax-exempt while they stay in the plan. When earnings are withdrawn as part of a disability assistance payment, they are taxable.

An important feature of the RDSP is that the Ministry of Housing and Social Development will not classify it as an asset. If you are receiving the Persons With Disabilities (PWD) benefit from the provincial government, you will be permitted to save over $3,000 if it is invested in an RDSP.  As well, money held in an RDSP will not affect the application process if you are applying for PWD or any other government assistance program.

Eligibility
To be eligible for the RDSP, you must be a Canadian resident and 59 years of age or younger. You must have a Social Insurance Number (SIN), as well as approval to receive the Disability Tax Credit (DTC). The DTC is a tax credit that is available for people with disabilities who have limitations in activities of daily living. If you do not have the DTC, you can apply for it through the Canada Revenue Agency website: http://www.cra-arc.gc.ca/E/pbg/tf/t2201/README.html

Want to learn more? 
The Plan Institute, a Canadian non-profit organization that assists families of persons with a disability, is offering free tri-monthly telephone seminars about the RDSP.  More information, including a fact sheet about the plan, is available from their website at: www.plan.ca

The Canada Revenue Agency has compiled a list of frequently asked questions about the RDSP.  This can be viewed on their website at: http://www.cra-arc.gc.ca/tx/rgstrd/rdsp/fq-eng.html