by Krystian Shaw
I am pleased to tell you about the registered disability savings plan [RDSP] and how families can save for the future.
Who is eligible? If you have a long term disability under the age of 60, are a Canadian resident with a social insurance number, are eligible for the disability tax credit and are looking for a long term savings plan, then the RDSP is for you.
There are 2 parts to the RDSP: a grant and a bond.
The Grant: The Federal Government will pay a grant of up to 3 times the amount you put in. For example: If you put in 5 hundred dollars a year, the government will add 15 hundred dollars to it, so your savings has gone up to 2 thousand dollars that year instead of just the 5 hundred you added towards it. The government will do this every year that you put money in to a maximum of 70 thousand dollars. That is the limit the government will give you in a lifetime for the grant.
The Bond: For families with low to moderate incomes, the Federal Government also pays a bond of $1000.00 a year without you contributing anything, up to a limit of 20 thousand dollars. No contributions are needed to receive the bond. It’s free money to help save for the future.
Grants and bonds are paid until the year you turn 49. They have to remain in the RDSP for at least 10 years because grants & bonds are intended for long-term savings.
Anyone can contribute to the RDSP towards the grant with permission from the plan holder, whether it’s family, friends, or neighbours. This gives people who want to help a way to do so.
There is no contribution limit each year for the grant but there is a lifetime contribution limit of 20 thousand dollars. Until you take money out of the plan, earnings that add up are tax-free. The RDSP is our government’s commitment to help those with a long-term disability save for the future.
RDSP’s offer the best returns on investments available. Your money will grow – it might even triple in size.
RDSP is exempt from most provincial disability benefits and from income assistance benefits. You don’t need to claim it even once you start using it.
And keep in mind, although there are two parts to the RDSP, the grant and a bond, If you don’t want to put in a contribution for the grant or can’t afford to do so, you don’t have to. You will still get the thousand dollar bond automatically every year and interest will be added to it so even that money will grow up to a maximum of 20 thousand dollars or until you reach 49.
In summary, for every $1 put in an RDSP towards the grant portion, the Federal government will match up to $3 if the family income is below $87.907.
This is a Canada Disability Savings Grant.
For families living on less then $25,584.00, the federal government will invest $1000.00 each year without any contributions added for 20 years or until the plan holder reaches 49, which ever comes first. This is a Canada Disability Savings bond. People living on an income between $25,584.00 and $43,953.00 can still receive a partial bond.
So the first thing you need to do is get an application to apply for the disability tax credit if you don’t already have the tax credit. You can get forms from people in motion or even at a bank that you plan to open the RDSP with. Talk to the bank about how to get started on saving for the future with the registered disability savings plan.