Registered Disability Savings Plan (RDSP) is a tax-deferred savings plan introduced by the Canadian government to assist parents and guardians in providing long-term financial security for a person with disabilities. It is a unique savings plan that helps people with disabilities save for their future. In this blog post, we will cover everything you need to know about the Registered Disability Savings Plan (RDSP).

What is RDSP?

The Registered Disability Savings Plan (RDSP) is a savings plan that is designed specifically for individuals with disabilities. It is a long-term savings plan that helps individuals with disabilities and their families save for their future. Contributions made to an RDSP are tax-deferred, meaning that the investment income earned on the contributions is not taxed until it is withdrawn.

Who can open an RDSP?

Anyone who is a Canadian resident under the age of 60 and has a valid Social Insurance Number (SIN) can open an RDSP. Individuals who have been diagnosed with a disability that is expected to last for a continuous period of at least 12 months, and that has a significant impact on their ability to perform daily activities, are eligible to open an RDSP.

Contributions to RDSP

The maximum amount that can be contributed to an RDSP is $200,000 per beneficiary over their lifetime. Contributions can be made until the end of the year in which the beneficiary turns 59. There is no annual contribution limit for RDSPs, but contributions must not exceed the lifetime limit of $200,000.

Government Grants and Bonds

The Government of Canada provides grants and bonds to help individuals with disabilities save for their future. The Canada Disability Savings Grant (CDSG) and Canada Disability Savings Bond (CDSB) are two programs available to individuals who have an RDSP.

The CDSG matches up to 300% of the first $500 contributed to an RDSP each year, with a maximum of $3,500 per year and a lifetime maximum of $70,000.

The CDSB provides up to $1,000 per year to RDSPs of low-income beneficiaries. The lifetime maximum for the CDSB is $20,000.

Withdrawals from RDSP

Withdrawals from an RDSP are known as Disability Assistance Payments (DAPs). DAPs are payments made to the beneficiary of the RDSP to help with their long-term financial security. DAPs are taxable in the hands of the beneficiary and are based on the terms of the plan. RDSP beneficiaries can receive DAPs until the end of the year in which they turn 59.

Conclusion

Registered Disability Savings Plan (RDSP) is a unique savings plan designed for individuals with disabilities. It is a tax-deferred savings plan that provides financial security for individuals with disabilities and their families. Contributions made to an RDSP are tax-deferred, and government grants and bonds are available to help individuals with disabilities save for their future. The maximum amount that can be contributed to an RDSP is $200,000 per beneficiary over their lifetime. RDSP beneficiaries can receive Disability Assistance Payments (DAPs) until the end of the year in which they turn 59.