RDSP offers a bonus

Starting in 2011, the registered disabled savings plan (RDSP), which is open to Canadians who qualify for the disability tax credit, offers a tremendous bonus to those who are eligible.

The RDSP is a savings plan that you contribute to after-tax, with earnings and growth accumulating tax-deferred. The maximum amount that you can invest is up to $200,000. Contributions can be taken out tax-free, with the growth and other funds when withdrawn being reckoned as part of your income for tax purposes.

A major benefit of the RDSP is that the funds can be supplemented with Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs) for beneficiaries who are under 50 years old, and the bonus offered this year is that CDSGs and CDSBs can be collected retrospectively for previous years, subject to any unused entitlements.

CDSGs are subject to an income test, based on the family's income if the beneficiary is 18 or under, and on the beneficiary's income if older. For any income up to $83,088, the CDSG is equal to 300% of the first $500 contributed, and 200% of the next $1000, giving a maximum annual entitlement of $3500. For those with the higher income, the CDSG is limited to 100% on the first $1000 contributed each year, which still doubles the contribution. The maximum lifetime CDSG you can receive is $70,000.

CDSBs, the bonds, are payable without any contributions being required. Again the amount is means tested, with an annual income up to $23,855 qualifying for $1000, a sliding scale between $23,855 and $40,970, and nothing paid if the income is above this. All these income levels are adjusted each year for inflation.
For the first time from 2011, the CDSGs and CDSBs can be collected retrospectively, based on new contributions in the case of the grant funds. They will ultimately be paid on the basis of the preceding 10 years, but will not be paid for years prior to 2008. The amounts would be based firstly on the highest matching rates, then on the lower rates, and depend on the income test for each year.

This example will show you how beneficial this can be. Ruby has a disability that qualifies her for this plan, has had it prior to 2008, and has really had little income, certainly below the threshold values mentioned above. She has not opened an RDSP yet, so she hasn't used any of her entitlements for this or previous years.

If in 2011 she can find $2000 with which to open an RDSP, this will be matched with $10,000 from the government. It works out like this. Under the 'highest matching rate' rule, $500 is allocated to each of the years 2008, 2009, 2010, and 2011, qualifying her to receive three times as much ($1500) for each year for a total of $6000. With a low income she qualifies for CDSBs of $1000 for each year, giving her another $4000 in her savings plan.

She hasn't used up all her entitlements, so if in 2011 or later years she can find more money to invest, she can come back and claim more grant funds at 200%. To make sure you get the maximum benefit, contact your financial advisor.

Questions about RDSPs?
Contact our office!

Copyright © 2011 AdvisorNet Communications Inc. All rights reserved. This article is provided for informational purposes only and is based on the perspectives and opinions of the owners and writers only. The information provided is not intended to provide specific financial advice. It is strongly recommended that the reader seek qualified professional advice before making any financial decisions based on anything discussed in this article. This article is not to be copied or republished in any format for any reason without the written permission of the AdvisorNet Communications. The publisher does not guarantee the accuracy of the information and is not liable in any way for any error or omission.


What our clients are saying...

  • We valued receiving a detailed report and explanation of our finances. When working with a financial planner, we expect to have our questions answered with adequate detail and to have a plan developed to help grow our money. Our expectations were clearly met and we would be happy to recommend Anthony to anyone looking for a Financial Plan.

  • We valued the fact that you sat down with us, heard what we wanted to say, asked for clarification and offered suggestions, and then came up with a detailed and well-reasoned plan in a short period of time and communicated that back to us so that we knew what we needed to do moving forward. Thanks!

    Our expectations for a financial planner are several fold: (1) Does the planner communicate well, in that they both listen but also offer suggestions and ideas in a clear easy-to-understand way, (2) Are they able to meet their client at the same energy/level and meet their specific needs? In our case we needed a tax minimization strategy within a short turn around time. (3) Did the planner actually do their job, in that were they able to provide ideas and suggestions that helped address the client's asks?

    We came to see you because we realised that we hadn't looked at how to minimize the taxes related to my Father’s estate planning and my mother’s future financial planning, and you were able to tell us things that we didn't know about, and offered us solutions that helped us with our future financial planning.

    You definitely met our expectations! In some ways, you actually exceeded our expectations. We were hoping that you could respond quickly, and you came up with a detailed and well-reasoned plan faster than we expected!

    Our only area of improvement we could think of was, given that the plan was very detailed, if we had an explicitly spelled out action plan with a timeline for completion.

    We are very happy and would definitely recommend you to our family and friends and in fact have already done so!

  • Anthony made the process very clear and explained each step along the way. He was very honest and straight forward. My expectation from a financial planner is that they are honest and transparent. Anthony definitely met my expectations and I would be happy to recommend him to my family and friends.

  • When working with a financial planner our expectations are to maximize our investments and have a solid plan for retirement. We now have a greater awareness of our current portfolio and options to best protect our estate. We were provided with good information to use in order to make better investment and estate planning decisions. We would gladly recommend Anthony to our family and friends.

  • We value the personal service and detailed explanations we receive from Anthony on an ongoing basis. We feel comfortable recommending Anthony to our family and friends as he is someone who we can trust and has our best interests in mind. He has been great at helping us work towards a comfortable and manageable retirement.

  • The financial planning process we went through was clearly outlined and explained to me. I wanted to have a better understanding of my financial position and to know whether I could retire early or not.

    I am happy to recommend Anthony to my family and friends.