The Registered Disability Savings Plan (RDSP) is a new type of registered savings plan designed to help families plan for the financial security of a loved one living with a disability. The plans are unique in that they allow anyone to contribute to the account which grows tax-free until withdrawn.
A big advantage of the RDSP is that the Federal Government has pledged to help families save for their RDSP with annual government contributions through the Disability Savings Grant and Disability Savings Bonds. These contributions will help families with their goal of attaining a level of financial security for their loved one.
The key to successfully implementing a RDSP is to construct a plan that will maximize the benefit for the plan beneficiary. Integra helps families with this by establishing the investment horizon, creating and implementing a contribution plan, determining the optimal investment portfolio and monitoring the success of the plan over time.
Although RDSPs are not yet available, the Federal Government is currently establishing the final provisions for the plan. Integra is committed to offering these plans as soon as they become available and we therefore encourage families to contact Integra to ensure they are prepared to meet the eligibility requirements when the plans are available. To beginning planning or to be contacted when the plans become available, please contact Sean Weaser at 416.869.5131 or via email at sweaser@integra.com.
RDSP Frequently Asked Questions
What is the Registered Disability Savings Plan (RDSP)?
Who is eligible for the Registered Disability Savings Plan?
Who can contribute to a Registered Disability Savings Plan and how much can be contributed?
Who is eligible for the Government contributions to the RDSP?
How much will the Government contribute to my RDSP?
How can Integra help maximize the benefit of an RDSP to the beneficiary?
How can I find out more information about RDSPs?
What is the Registered Disability Savings Plan (RDSP)?
RDSPs are a new type of registered savings plans that are designed to allow families to save for the financial security of a loved one living with a disability. The plan allows contributed funds to grow tax-free until withdrawal.
Who is eligible for the Registered Disability Savings Plan?
To be eligible for the RDSP, a person must be a Canadian resident who is eligible for the Disability Tax Credit. Alternatively, a parent or legal representative of a Canadian resident who is eligible for the Disability Tax Credit can also open a RDSP.
Who can contribute to a Registered Disability Savings Plan and how much can be contributed?
Anyone can contribute to a RDSP. However, unlike RRSPs, there is no maximum annual contribution restrictions. The Federal Government has, however, placed a lifetime contribution limit on the plans. A total of $200,000 may be contributed into a RDSP over the life of the plan.
Who is eligible for the Government contributions to the RDSP?
There are two available sources of government contributions: (1) the Canadian Disability Savings Grant; and (2) the Canadian Disability Savings Bond. Everyone with a RDSP, regardless of income level, is eligible for the Disability Savings Grant, provided contributions are made to the plan. The contribution amount received from the Government for the Disability Savings Grant is based on annual income. Depending on income level, families may also be eligible for the Disability Savings Bond. Families may receive both the Disability Savings Grant and the Disability Savings Bond.
How much will the Government contribute to my RDSP?
The provisions for the Disability Savings Bond and Disability Savings Grant are based on income and contribution levels. It is the income level of the family that is taken into consideration if the beneficiary is under the age of 18, and the income level of the beneficiary if they are over the age of 18. The maximum contribution a plan can receive from the Government of Canada is $4,500 per year. This is based on receiving $3,500 from the Disability Savings Grant (requires a $1,500 personal contribution) plus $1,000 from the Disability Savings Bond. For families which fall into the highest income level, plans can still receive $1,000 per year from the Government, based on an equal contribution to the plan. The following is the contribution schedule for both the Disability Savings Bond and the Disability Savings Grant.
Disability Savings Grant
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Income
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Less than $74,357
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Greater than $74,357
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|
Annual Grant Amount
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$1,500 Government contribution for the first $500 personal contribution.
$2,000 Government contribution for the next $1,000 personal contribution
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$1,000 Government contribution for the first $1,000 personal contribution
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|
Maximum Contribution
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$70,000 over 20 years
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$20,000 over 20 years
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Income Level
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Annual Government bond contribution
regardless of personal contribution
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Less than $20,833
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$1,000
|
|
$20,833 - $24,000
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$809
|
|
$24,001 - $28,000
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$563
|
|
$28,001 - $32,000
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$318
|
|
Over $32,000
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$0
|
How can Integra help maximize the benefit of an RDSP to the beneficiary?
The RDSP amount ultimately available for the beneficiary is the product of several factors. The factors that play the largest role include the length of time the investments have to grow, the amount and timing of contributions, as well as the investment decisions made throughout the life of the plan. Although RDSPs are new, Integra has been helping Canadian families invest for their future for almost 15 years. We can create an investment plan that takes into consideration the following points:
- Maximizing government contributions
- Matching the investment strategy of the plan to the time horizon of the beneficiary
- Keeping the fees that eat away at investment returns low
- Assessing current savings and determining whether they are more productive within a RDSP
How can I find out more information about RDSPs?
The Canada Revenue Agency, as well as the Department of Finance both have summary information about RDSPs on their respective websites. Integra can also provide information about RDSPs, notification of plan updates, as well as information on plan investment options. For more information, please contact Sean Weaser at 416.869.5131 or sweaser@integra.com.
RDSP Growth Scenarios
The following growth scenarios are for illustrative purposes only and require us to make certain assumptions about the growth of investments and contributions from the government and family members. Returns presented below may under, or overstate actual realized returns. We have assumed an annualized investment return of 6% and government contributions based on the schedules outlined above. The following examples do not constitute any investment offerings or return guarantees.
Scenario 1
This scenario outlines a situation where the family/beneficiary desires the funds to be held in the plan as long as possible so that saved funds can last. Under this scenario, the beneficiary would be living on alternative funds until the plan requires withdrawals to be commenced at age 60.
- Family with a 10-year-old daughter/son and income over $74,357
- Family makes an initial deposit of $20,000 and then contributes $2,400 per year until beneficiary is age 59 (eligible for the Disability Savings Grant of $1,000/per year for 20 years)
- RDSP balance at age 60 = $1,150,000
- Approximate yearly pre-tax payout until age 75 = $100,000
Scenario 2
RDSPs can be set up to allow for lump-sum withdrawals of the funds. Scenario 2 assumes that the plan has been established to allow for a lump-sum withdrawal. This may be done if the family/beneficiary wishes the funds to be used for a large purchase like a home.
- Family with a 20-year-old daughter/son and income between $37,187.00 and $74,357.00
- Family makes an initial deposit of $10,000 and then contributes $1,500 per year until beneficiary is age 40 (eligible for the Disability Savings Grant of $3,500 per year for 20 years)
- Pre-tax lump-sum payment of $180,000 available for purchase of home
Scenario 3
Families currently saving may wish to transfer assets from another source into a RDSP to take advantage of the significant growth opportunities that exist under a tax-deferred plan. Scenario 3 addresses the situation where a family transfers current savings into a RDSP.
- Family with a 30-year-old daughter/son make a lump-sum contribution transfer from a taxable savings account to a RDSP of $75,000
- Family makes annual contributions of $2,400 per year until beneficiary is age 50 and no contributions from age 50 to 60 (eligible for the Disability Savings Grant of $1,000 per year for 20 years)
- Approximate yearly pre-tax payout starting at age 60 until age 80 = $45,000
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