“I don’t know how I am ever going to save for my retirement” said Lesley to her best friend Kayla. “Ever since my injury at work, I worry about my golden years and how I am going to get by financially. I can manage day to day right now, but long-term, I am concerned.”
“I understand what you are saying, Lesley”, said Kayla to Lesley. “But don’t you currently receive the disability tax credit (DTC) from the Federal Government?
“I do. It has certainly helped me a lot. However, as I age, I may need more and more assistance and I am not sure how I will be able to pay for that.”
Kayla considered Lesley’s words, and something jogged her memory. “I read something the other day about a Registered Disability Savings Plan or an RDSP. It’s a special type of savings account for Canadians with disabilities that helps them save for their retirement. You should look into it.”
After researching, Lesley learned that to open an RDSP, she had to:
Be eligible for the Disability Tax Credit;
Be a resident of Canada;
Be less than 60 years of age; and
Have a valid Social Insurance Number.
Lesley qualified and immediately opened an RDSP account and started making small contributions. Along with her financial planner, Lesley calculated that if she contributed $1500 annually for 20 years, she would receive $70,000 in grants and $20,000 in bonds. Assuming an average annual return of 6%,she would have $221,000 in her RDSP. Lesley did a quick calculation and determined she could have the account continue to grow another ten years before she needed to start withdrawing. If the account continued to grow another ten years at 6% annually, she could end up with $395,000 in her account without any contributions! However, Lesley could decide to continue her contributions as well until she is 60 for even further potential growth.
Lesley finally felt she could breathe easier knowing she was building wealth for her future.
Registered Disability Savings Plans (RDSPs
People with disabilities and their loved ones face a distinct set of financial challenges throughout their lives. To help address these challenges, the Government of Canada introduced the Registered Disability Savings Plan (RDSP) in 2008. Designed to help build long-term financial security for disabled persons, the RDSP makes it easier to accumulate funds by providing assisted savings and tax-deferred investment growth.
Key benefits of an RDSP
Money contributed grows tax free.
Anyone can contribute to an RDSP with the written consent of the account holder.
Contributions can be matched, based on family income, with up to $3,500 a year in Canada Disability Savings Grants (CDSG) and up to $1,000 a year in Canada Disability Savings Bonds (CDSB).
Carry forward on CDSG and CDSB is available back 10 years or to date of diagnosis.
The total lifetime contribution for each beneficiary is $200,000, with no annual contribution limits.
If a parent or grandparent passes away and has a financially dependent child or grandchild, they can transfer up to $200,000 of their RRSP/RRIF or RPP to the dependent’s RDSP on a tax-deferred basis.
Maximize your savings
Start saving early. Make it automatic by enrolling in a pre-authorized chequing program.
Take advantage of government grants and bonds and contribute every year to get the maximum annual Canada Disability Savings Grant and Canada Disability Savings Bond.
Plan withdrawals to avoid federal grant and bond repayments.
If you are currently receiving the Disability Tax Credit (DTC), or know of someone who is, contact us to learn more about opening a Registered Disability Savings Plan (RDSP). The sooner you do, the sooner you start to secure your financial future. (Source: Mackenzie Investments, Services Canada).
Call 604.940.8617 today to learn more!