Registered Disability Savings Plan

Summary

A Registered Disability Savings Plan (RDSP) is a Government of Canada program designed to enable individuals with disabilities, with assistance from family and friends, to save for their future financial security.

Issue addressed

Due to improvements in life expectancy for people living with a disability, many are now outliving their parents and close relatives. While this is a welcome change, it presents a new problem as it pertains to saving for health related costs into the future. Strict benefit guidelines prevent them from building financial assets that will allow for independence in their later life.

Background information

Due to improvements in life expectancy for people living with a disability, many are now outliving their parents and close relatives. While this is a welcome change, it presents a new problem as it pertains to saving for health related costs into the future. Strict benefit guidelines prevent them from building financial assets that will allow for independence in their later life.

Description of practice

The Registered Disability Savings Plan (RDSP) is a powerful savings tool designed specifically for people living with a disability. The Plan allows those living with a disability financial security well into older age avoiding the poverty trap and enabling independence.
The financial plan allows anyone already eligible for the Disability Tax Credit to invest up to $200,000 in savings tax-free until withdrawal, and to spend the money in whatever way would benefit them most. The plan also allows family members and loved ones to contribute to a member’s RDSP, and the federal government matches contributions through Canada Disability Savings Grants and Bonds.
The Registered Disability Savings Plan (RDSP) is a Canada-wide registered matched savings plan for people with disabilities.
For every $1 put in an RDSP account, the federal government will match it (if the family income is below $87,907) with up to $3. This is the Canada Disability Savings Grant.
For people living on a low-income (less than $25,584), the federal government will invest $1000 each year for 20 years. This is the Canada Disability Savings Bond.
People living on an income between $25,584 and $43,953 can still receive a partial bond.
Anyone can contribute to an RDSP – family, friends, and even neighbours. This gives people who want to help a way to do so.

RDSPs offer some of the best returns on investment available.
The RDSP is exempt from most provincial disability and income assistance benefits. The government will not claw this money back.
There are no restrictions on how RDSP withdrawals are spent.

Analysis

The Registered Disability Savings Plan is a good practice because it allows parents to leave money to their children with disabilities, to plan a good life from them while avoiding the high risk of abuse by family members or any other closed person. It gives part of the answer to parents who are worried about “what happens when we die?”. And it is a long term placement and an interesting financial tool as savings can be put by parents, friends or the person with disability him or herself and it is supported by government contribution. The RDSP is one important tool along the path to a good life.

Canada’s Registered Disability Savings Plan is now available in every province and territory of Canada and is the first of its kind, so it is no surprise that it is piquing interest around the world. While the basic idea would be easy for other countries to adopt, pioneering it in Canada took a lot of thought and work.

 

More information

http://rdsp.com/

For the Step by Step Guide to start a RDSP, please click here.

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