The Basics of the Registered Disability Savings Plan

By Josh Kositsky

Have you ever heard of the Registered Disability Savings Plan (RDSP)? It is one of the least known retirement savings plans available to Canadians, as it is specifically designed for people living with a disability.

There are three conditions in order to open a RDSP with a financial institution. The individual beneficiary must be:

1. Eligible for the disability tax credit;
2. Under the age of 60; and
3. A Canadian resident with a Social Insurance Number.

After you have been approved and opened a RDSP, you can start contributing to the plan. A future article will outline the details of the contributions and matching program offered by the government. For example, an annual contribution of $1,500 can result in the government contributing bonds & grants of up to $4,500 to the plan depending on the beneficiary’s net income. The unused grants/bonds can be carried forward to future contribution years, but I recommend opening a RDSP as soon as possible to accumulate monies, as no contribution is required to receive bonds.

What can you invest in? As the RDSP is encouraged to be a long-term savings plan, there are certain limitations to the investments that you can purchase. You can invest in term deposits and/or mutual funds, as they have a relatively low investment risk. However, you cannot invest directly into shares of a company (e.g. Apple, Amazon, Google, etc.). This is one of the main reasons why RDSP transactions cannot be completed online. All transactions must be done in-person and are then forwarded to the bank’s head office to be completed.

If you have any further questions, feel free to inquire. There will be future articles outlining additional details of the RDSP based on the comments and questions that I may receive.

Josh Kositsky is a Chartered Professional Accountant (CPA) in BC & Ontario and gained his experience working in a public accounting firm focusing on corporate/personal tax compliance and planning for small owner-managed business across a variety of industries. He is currently studying for his Chartered Business Valuator designation.