Planning for the long-term future can be complicated and feel out of reach when it comes to disability. For parents/guardians of children and youth, there’s already so much to think about and plan for – getting them through primary school, thinking about their higher education and work options, helping them in navigating relationships, helping them participate in activities that bring them joy, and making sure disability related supports are secured. We aim to provide free support with the disability tax credit (DTC) and registered disability savings plan (RDSP) so that you can focus on what’s important, spending time with your child!
For adult guardians of children and youth under age 18 who qualify for the DTC, you can receive tax deductions and payments through the Child Disability Benefit (CDB).
Outside of these tax benefits, the DTC opens the door to the RDSP – a long-term investment savings plan to which the government will contribute up to $90,000 in the form of grants and bonds. The RDSP can also receive up to $200,000 in personal contributions, earn unlimited investment income, and is completely exempt for all federal and most provincial/territorial disability and income assistance programs!
Time is the most valuable asset when it comes to using the RDSP to save money and create a financial safety net for your child – the earlier an RDSP is set up, the earlier grants and bonds can be claimed and be allowed to grow!
Kai is currently 10 years old and has been diagnosed with cerebral palsy since birth. His grandparents who are also his legal guardians work with his doctor to get him approved for the DTC and decide to open an RDSP. They are low income and only able to contribute $200/year while Kai is in school and under the age of 18.
The government will match the $200/year and Kai’s RDSP will receive $4,800 in grants by the time he’s 18. The government will also provide over $12,000 in bonds just because the RDSP was opened and the family meets the income criteria. The RDSP is worth over $27,000 by the time Kai is 18. Kai and his grandparents know that the RDSP is a long-term savings plan so they continue to let the money in the account grow.
When Kai is 18 he starts working full-time and is able to contribute an additional $100/month ($1,200/year) to the RDSP in addition to his grandparent’s $200/year contribution. By age 29, Kai has received the maximum $20,000 in bonds and $70,000 in grants from the government. He is able to wait 10 years, keep contributing to the RDSP, and decides to start taking money out of the RDSP at age 39. By age 39, his RDSP has grown to over $215,000! If he decides to keep the money in the RDSP and let it grow until he is nearing retirement age, he could have over $500,000 in the RDSP to support him in his retirement, all while still receiving federal and provincial disability benefits.
Arden was in a car accident at age 16 and develops several disabilities because of it. Her parents and their family nurse practitioner apply for Arden’s DTC and are approved for it. They decide to open an RDSP and contribute $50/month into the plan. By the time Arden is 18, she has received $3,400 in grants and $364 in bonds from the government. Her RDSP is already worth $8,782.13.
Once Arden reaches the year she turns 19, the government is going to start using her income to determine eligibility for grants and bonds. She isn’t able to work and relies on provincial disability income assistance. Her parents continue contributing $50/month into her RDSP, and Arden also contributes $10/month to it. By age 42, Arden has received the maximum $20,000 in bonds. She keeps contributing to the RDSP up until the end of the year she turns 49 so she can get as many of the matching grants as possible. While she isn’t able to receive the full $70,000, she does receive $62,080.
Arden keeps the RDSP open but stops contributing in her 50s. By the end of the year she turns 60 and her regular withdrawals need to start, she has over $300,000 in her RDSP. She will expect more than $13,000/year from her RDSP starting that year, which will continue until the funds have been exhausted.
*All scenarios were calculated using the RDSP Calculator at rdsp.com/calculator. The investment strategy chosen before withdrawals begin is moderate at 5%. The investment strategy chosen after withdrawals begin is conversative at 3%.