If you or someone in your family is living with a disability, then the Registered Disability Savings Plan (RSDP) can be an excellent way to save, tax-deferred, for the future as well as potentially collect up to $90,000 in government grants and bonds.
The Canadian Disability Savings Grant (CDSG) provides matching contributions of up to $3,500 annually, with a lifetime limit of $70,000, while the Canadian Disability Savings Bond (CDSB) allows qualifying low-income families to collect $1,000 per year up to a maximum of $20,000.
The plan is for those under the age of 60 with serious and ongoing physical or mental impairments. Parents can set up the RDSP for their disabled children, or disabled adults can set up the plan for themselves.
For those starting a little later, no worries. You can carry forward your unused entitlements to a maximum of $10,500 for the Disability Savings Grant and $11,000 for the Disability Savings Bond in one year.
These grants are based on “family” income, which includes income of the beneficiary’s parents if the RDSP beneficiary is under the age of 19. Once the child reaches age 19, it’s their own family income that issued to determine the amount of government assistance.
A key benefit of using RDSPs is they allow money to grow tax-sheltered, meaning the individual for whom the account is set up (the beneficiary) never pays tax on earnings until funds are withdrawn. While there’s no limit to how much you can put into an RDSP each year, there is a $200,000 lifetime contribution limit. Because the plans are meant to be withdrawn after 60, no more contributions can be made at the end of the year the beneficiary turns 59.