RDSP
What Is RDSP?
A Registered Disability Savings Plan (RDSP) is a plan designed to help parents and individuals with disabilities save for long-term financial security.
How does an RDSP work?
The Registered Disability Savings Plan (RDSP) operates similarly to an RESP or TFSA: the account must be registered with the federal government, and all earnings within the account grow tax-free as long as they remain there. To qualify, the beneficiary must be approved for the Disability Tax Credit (DTC).
Anyone can contribute to the RDSP, with a lifetime limit of $200,000 and no annual limit. The federal government pays a matching amount of 100%, 200% or 300% into an RDSP through the Canada Disability Savings Grant. RDSP contributions can be made until December 31 of the year in which the beneficiary turns 59; the following year, withdrawals from the plan can begin, and no further contributions may be made.
Key features of the RDSP
Contributions grow tax-free until they are withdrawn, allowing for potential investment growth over time.
Contributions may be eligible for government grants, which can help boost savings.
There are no immediate tax benefits from contributing to an RDSP, unlike those associated with an RRSP, for example.
The individual with a disability, or their legal representative, controls the RDSP and decides how and when to withdraw funds.
Withdrawals, including grants and investment income, is taxed in the hands of the beneficiary.
RDSPs can be opened at any age; however, government grant contributions for the RDSP end at age 49.