The Registered Disability Savings Plan, or RDSP, is a type of registered savings account that was introduced in 2008 to help Canadians receiving the Disability Tax Credit (DTC) have a more stable financial future.
It’s a program designed somewhat like the Registered Education Savings Plan (RESP). Money is contributed into the plan by eligible plan holders and the government will kick in annual money in the form of a matching grant and bond. The amount of the grant depends on the family income of the beneficiary and contributions to the plan.
Here are all the details on the RDSP, including who qualifies, contribution and withdrawal rules, and more.
Key Takeaways
- The RDSP is a way to save for the financial benefit of those with disabilities.
- While there’s no annual limit on RDSP contributions, the lifetime limit is $200,000.
- It offers government grants based on income and contributions – up to a maximum annual amount of $4,500.
- Grants and bonds can be issued until the beneficiary turns 49.
- RDSP withdrawals must start at age 60.
Who qualifies for the RDSP?
To qualify for the RDSP, the beneficiary of the program must meet 4 criteria:
- be under the age of 60,
- be a Canadian resident,
- have a valid Social Insurance Number, and
- be eligible for the Disability Tax Credit.
If you or someone you know might be eligible, see your doctor who can fill out a Form T2201 to make that determination. An eligible beneficiary can only have one RDSP.
RDSP contributions
There is no limit to the amount that can be contributed to the plan in a year, but the maximum lifetime contribution limit is $200,000. A plan holder, also called an authorized contributor, is able to make deposits into the plan and authorize others to do the same. Contributions are not tax deductible and must be made before the beneficiary turns 60 years old.
Beneficiaries can also receive government grants and bonds paid into the RDSP, based on their family income and the contributions made from plan holders.
For more information on who can and can not open an RDSP, see: Opening an RDSP.
RDSP government bonds and grants
There are 2 types of government grants available:
- Canada Disability Savings Bond, and
- Canada Disability Savings Grant.
These grants must be applied for when opening the plan and the amount of the grant depends on your income tax return from 2 years prior and the annual contribution to the RDSP.
Family income is based on the household income if the beneficiary is under 18 years of age. If the beneficiary is 18 or over, the family income is based on his or her income, and that of their spouse, if any.
Government grants and bonds can only be received up to the end of the year the beneficiary turns 49.
Canada Disability Savings Bond
The maximum annual disability bond is $1,000. Here’s the thresholds for the 2022 tax year (for bond money in 2024):
| Family income | Amount |
|---|---|
| $32,797 or less | $1,000 |
| $32,797 to $50,197 | A prorated amount |
| More than $50,197 | No bond available |
If you have a family income of less than $32,797, the government will deposit the bond into the RDSP without you having to contribute anything. RDSP beneficiaries can receive up to $20,000 total bond money in their lifetime.
Canada Disability Savings Grant
Here’s the 2022 income thresholds for the Canada Disability Savings Grant:
| Family income | Government matching % |
|---|---|
| $100,392 or less | * 300% of the first $500 * 200% on the next $1000 |
| Over $100,392 | * 100% of the first $1,000 |
As you can see, if you contributed $1,500 to the RDSP and the beneficiary’s family income is under the threshold, the government will throw in $3,500 – the annual maximum amount.
It may be possible to "catch up" on missed bonds and grants through what’s called a carry-forward, in which case you would receive more than the annual limits.
The maximum lifetime disability grant that can be received is $70,000.
For additional details, such as repaying grants and bonds, see: Canada disability savings grant and Canada disability savings bond.
Withdrawing money from the RDSP
The beneficiary of the RDSP must begin collecting from the plan at age 60.
When it’s time to start receiving income from the RDSP, the money will be taxed in the hands of the beneficiary, who presumably will be in a low tax bracket. The payments will be received in the form of Lifetime Disability Assistance Payments (LDAP) and will consist of 3 parts:
- contribution,
- bonds and grants, and
- growth.
Only the growth, bond, and grant portions of the LDAP will be subject to income tax.
The biggest restriction on the RDSP is the penalty for withdrawing the money early. A beneficiary can request a payment from the RDSP at any time in the form of a Disability Assistance Payment (DAP) but if the beneficiary withdraws money from the plan prior to age 60, there is a claw back of 3 times the amount of the withdrawal or to the maximum Assistance Holdback Amount (AHA). The AHA is the total amount of bonds or grants received in the 10 years preceding the date of the DAP withdrawal and depends on the recipient’s age.
For more information about withdrawing from your RDSP, see: Withdraw money from your plan.
How to open an RDSP
Sadly, not all financial institutions offer the RDSP to their clients. Each of Canada’s big 5 banks offers the program, but the smaller companies do not seem interested at this time.
To open an RDSP, the process is fairly straightforward:
- find a bank, financial institution, or credit union that issues RDSPs,
- provide necessary information to open the account (the issuer will need to confirm the eligibility of the beneficiary),
- make a contribution and authorize others, if necessary,
- apply for grants and bonds, and
- choose an investment option for your contributions, such as GICs, mutual funds, stocks, etc.
To see a list of issuers that offer an RDSP, visit: Who can open a plan and apply for grants and bonds.
Will you open an RDSP?
So if you qualify for the RDSP but haven’t opened one yet, now is a good time to look into it. The bonds and grants are impressive and that’s a lot of money being left on the table by anyone not taking advantage of the program.
Will you open an RDSP for yourself or a loved one? Let us know your thoughts in the comment section below.
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$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.FAQ
What is an RDSP?
An RDSP, or Registered Disability Savings Plan, is intended to help financially support those living with a disability in their later years. It’s a registered account that eligible plan holders can contribute to and the plan may also receive government funds in the form of grants and bonds.
When can I withdraw from the RDSP without penalty?
You can start withdrawing from the RDSP at age 60. If you make a withdrawal earlier than that, you may need to pay back some of the government contributions.
Are RDSP contributions tax deductible?
No, the money contributed into a RDSP by plan holders is not tax deductible. The interest and government contributions that are earned in the plan are not taxed while in the plan but upon withdrawal, they will be counted as taxable income for the beneficiary.
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