Registered Disability Savings Plan (RDSP): What Is It?

Registered Disability Savings Plan (RDSP): What Is It?

Physical and mental disabilities make it challenging for individuals to maintain financial security or work. A Registered Disability Savings Plan (RDSP) gives disabled citizens a way to save money. Individuals wondering, “What is an RDSP?” may be eligible to start a savings plan, while ineligible citizens can contribute to other types of funds.

What Is an RDSP?

Registered Disability Savings Plan or RDSP is a savings plan that allows disabled Canadians to prepare financially for their future. It operates similarly to the Registered Retirement Savings Plan (RRSP). Holders receive monetary deposits over an extended period.

In addition to disabled people opening and funding an RDSP, family members of these individuals can also open and contribute to an RDSP on their behalf. Caregivers may open an RDSP to prepare to meet the healthcare demands of a disabled loved one, and those with disabilities may save or use the money to pay for regular expenses as they age.

Contributions can continue until the total contributed funds amount to $200,000 or the beneficiary turns 60. Government grants stop at age 49 and have a $90,000 lifetime limit.

Who Qualifies for an RDSP?

Those benefitting from a Registered Disability Savings Plan must meet all eligibility requirements. 

You must be eligible for the Disability Tax Credit (DTC). This tax credit reduces income tax for impaired individuals and proves disability status. Those eligible for this credit have serious, extended impairment or severe impediments regarding walking, dressing, speaking, mental functions, feeding, and more. 

Additional qualifications include:

  • Possess a valid Social Insurance Number (SIN)
  • Be younger than 60 years
  • Live in Canada

Benefits of an RDSP

An essential aspect when learning about “What is an RDSP?” is its benefits. Between investment location flexibility, government financial assistance, solutions for low-income individuals, significant contribution freedom, and effortless transfer of wealth, RDSPs offer many reasons to invest.

More Investment Choices

It’s easy to invest in a Registered Disability Savings Plan, no matter where you live. You’ll find the RDSP at many Canadian financial institutions, including banks, credit unions, and securities companies.

Government Benefits and Grants

Those with the Registered Disability Savings Plan can keep receiving their traditional government benefits as they will not disqualify you. In addition to receiving your regular government benefits alongside your RDSP, you may receive government grants. 

The lifetime grant contribution limit is $90,000. Regardless of the grant you apply for, you’ll need to meet specific criteria to be eligible and receive the maximum amount from the government.

  • Canada Disability Savings Grant (CDSG): This grant gives your RDSP up to $70,000 in lifetime contributions based on current RDSP deposits and beneficiary income.
  • Canada Disability Savings Bond (CDSB): This bond allows low-income households to get up to $20,000 for their RDSP and also depends on the family income.

Low-Income Assistance

Low-income disabled individuals don’t have to worry about their future. Generous contributions from the government allow you to save. 

Depending on income, you may receive a full or partial grant worth up to 300% or be eligible for the CDSB. Governmental and other entity contributions to your group RDSP are not taxable until withdrawal.

Contribution Freedom

Loved ones and caregivers wondering, “What is an RDSP?” can also contribute to this savings plan. It’s also possible for organizations and other entities to contribute. There is no annual contribution limit.

Some caregivers act as holders for RDSP beneficiaries and control all decisions regarding the account. Contributors must first have the RDSP beneficiary’s permission to donate. They cannot withdraw funds on behalf of the plan holder or beneficiary.

Wealth Transferral

Disabled individuals’ caregivers are frequently their parents or grandparents. These people may have their own retirement funds such as a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund (RRIF). When caregivers pass away, disabled dependents with an RDSP can still get investment income. 

Disabled beneficiaries can receive tax-free retirement savings from their deceased loved ones to continue supplementing traditional income. These individuals may also be eligible to receive the Canada Disability Savings Grant. The $200,000 RDSP lifetime limit still applies.

How Does the Disability Tax Credit Work?

If you suffer from long-term disability, read our article to find out if you can get money back on your taxes.

Group Enroll: Registered Disability Savings Plan Comparison Services

Group Enroll is a leading insurance broker offering comparison and selection assistance for disability insurance plans, Registered Disability Savings Plans, and more. Our team helps you locate and select the best RDSP available in your province by comparing competitive rates from top providers.

If you’re still wondering, “What is an RDSP?” the professionals at Group Enroll can further explain. We’ll answer all your questions regarding Registered Disability Savings Plans and help your employees and their loved ones get the solutions they deserve.

Fill out our quote form to get top quotes on group RDSP rates. Find Group Enroll at 10 Great Gulf Drive, Unit 5, Vaughan, ON, L4K 0K7, and contact our expert insurance brokers by emailing [email protected].

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