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Should You Join a Registered Disability Saving Program?

Registered Disability Savings Plan

Many people with disabilities have a great concern about their financial future.   There is a long term savings plan in place for Canadians who are qualified as being disabled.   This is called the RDSP meaning Registered Disability Savings Plan. It is often difficult for those who are on a limited income to find the extra money to pay into any type of pension program.   In these cases some individuals may be eligible to supplement their contributions into this particular pension program through a Canada disability saving grant or via a Canada Disability savings bond.

The agency responsible for the RDSP is the CRA.   Individuals participating in this program will have to name a beneficiary.  Regarding the grants and bonds these are under the control of Employment and Social Development Canada.

If you are a person who is interest in this offering there is specific criteria that you first have to meet.   You must be eligible for the disability tax credit regarding your taxes.   You must also possess a social insurance number and be a Canadian resident under the age of 60.

For those who are considered a minor a RDSP can be created by their parent or whoever is recognized as their legal representative.

To open a RSDP, you would need to contact a financial institution who offers these through their registration forms.   You will have the opportunity to contribute up to $200,000. During a lifetime, but there are no annual limits.    It is not just the individual who has the disability that can contribute to the pension either.   As long as the plan holder gives permission any individual can contribute to it.   However, it must be understood that any contributions made are not tax deductible. Payments made out of the RDSP are not included as income.

Any investment income that this pension plan accumulates is considered to be tax free, but this does not apply to the beneficiary’s income as it has to be included when paid out of RDSP.

There are some available resources that can help with the payments into this pension. One of them is the Canada Disability Savings Grant. For those who qualify it consists of up to $3,500 in contributions for a year.   Plus one may be eligible for the Canada Disability Savings Bond, for the amount of $1,000. a year to be paid into the pension. This is related to low or modest income families.

 

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