Special needs mom and daughter

If you are a Canadian citizen with a disability, you may worry about how you are going to save for later years.  Disabled Canadians face more employment challenges than their able-bodied counterparts, and that can make it difficult to save adequately for retirement.  The Canadian government has come up with a program that allows disabled Canadians to have a built-in savings plan on which they can draw when they retire.

The basics of the plan are as follows:

For every dollar the applicant puts into the RDSP, the federal government will match it with up to $3 with what is known as a Canada Disability Savings Grant.  This is assuming your household income is below the maximum level of $87,123.

Low-income applicants may be eligible for a $1,000 grant annually for 20 years, known as the Canada Disability Savings Bond.  Mid-income families (those with incomes between $25,356 and $43,561 may still qualify for a partial bond.

The RDSP is one of the best return on investment available.  In addition, the RDSP is exempt from most provincial disability benefits.  In other words, the balance in your RDSP account is not held against you in terms of your eligibility for benefits under provincial law.  Finally, there is no limit on what you can do with the money when you withdraw it.  It’s your money to do with what you please.

To be eligible to apply for an RDSP, you must be less than 60 years of age.  You need to first qualify for the Disability Tax Credit and the Canada Child Tax Benefit (if you have dependent children under the age of 19).  Essentially, The Disability Tax Credit reduces your taxes in recognition of your disability.  Although this does reduce the amount of taxes you pay, it is non-refundable meaning that you will not get any extra money back on your tax refund because of it.

You’ll also need to designate a Holder for your RDSP.  This person will manage your plan and make decisions about investments, payouts etc.   In most cases, the Holder will be you.  As long as you are an adult are competent in making such contractual decisions, you are considered the Holder unless you appoint someone else.  If your financial institution feels that you are not able to manage your financial affairs, they may ask that you have a legal representative manage your account for you.

Although most people contribute to their own RDSP, it is possible for anyone to contribute to your account, provided they have your written permission.   Contributions to your RDSP from other people are subject to the same government matching grants as contributions you make yourself.

If you are a Canadian with disability, you may be eligible to open an RDSP.  It’s by far one of the best ways to save for retirement if you are a disabled Canadian.  There are many benefits to saving money this way, and it’s worth looking into.  Ask your financial planner for more details, or check out a website such as True North Disability Services for more information.