Understanding the Registered Disability Savings Plan (RDSP)
- smitasgupta
- 10 minutes ago
- 3 min read
If you or someone you support is living with a disability in Canada, the Registered Disability Savings Plan (RDSP) is one of the most valuable, and most underused, financial tools available. This is an informative blog about eligibility and options for RDSP beneficiaries. If you would like a snapshot, here is a visual guide for you:
What is the Registered Disability Savings Plan (RDSP)?
The RDSP is a long term, tax deferred savings plan designed to help people with disabilities and their families build financial security. Anyone may contribute to an RDSP with written permission from the plan holder. Contributions are not tax deductible, but investment earnings grow tax deferred, and only certain portions of withdrawals are taxable when paid out.
Who is eligible?
To open an RDSP, the beneficiary must:
Be a Canadian resident
Have a valid Social Insurance Number
Be approved for the Disability Tax Credit (DTC)
Be age 59 or younger by December 31 of the year the RDSP is opened
Approval for the Disability Tax Credit (DTC) is required before an RDSP can be opened, so it is worth applying for even before you are ready to open the plan. Please refer to our DTC blog post if you'd like more information on how to apply.
How RDSP Works
The federal government adds two types of funding to an RDSP:
Canada Disability Savings Grant (CDSG): The government matches personal contributions at a rate of 100 percent, 200 percent, or 300 percent, depending on family income. In many cases, a $1,500 contribution can generate the full $3,500 annual maximum grant. The lifetime grant limit is $70,000.
Canada Disability Savings Bond (CDSB): For lower income beneficiaries, the government deposits up to $1,000 per year into the RDSP, even if no personal contribution is made at all. The lifetime bond limit is $20,000.
Together, grants and bonds can add up to $90,000 in government support over a beneficiary's lifetime, on top of a $200,000 personal contribution limit.
Grants and bonds are paid until the end of the year the beneficiary turns 49, so opening a plan earlier gives more years to build this fund. Unused grant and bond entitlements can also be carried forward for up to 10 years. Your financial institution can tell you how much unused entitlement is available through the RDSP Statement of Grant and Bond Entitlement.
A few things to keep in mind
Grants and bonds received within the previous 10 years may need to be repaid if funds are withdrawn, the plan is closed, or DTC eligibility ends and the RDSP no longer qualifies to remain open under CRA rules. There are exceptions, including for beneficiaries with a shortened life expectancy, and CRA has measures in place to protect some beneficiaries from immediate plan closure during temporary DTC interruptions.
Regular lifetime payments must begin by the end of the year the beneficiary turns 60.
In most provinces and territories, having an RDSP does not affect eligibility for other disability benefits, which means it can work alongside supports like the Disability Tax Credit, provincial disability assistance, or the Canada Disability Benefit.
Getting started
Most major banks and credit unions offer RDSPs. The first step is confirming DTC approval, then opening the plan and applying for the available grants and bonds. If you are supporting a family member or client, the RDSP is worth raising early, since the earlier the plan is opened, the more time there is to benefit from compounding growth and carried forward grants.
At FormEdOn, we help clients understand and navigate the funding programs available to them, including the RDSP, as part of building a stable financial foundation for education, employment, and independent living.
This post is for general information only and does not constitute financial advice. For guidance specific to your situation, consult a financial advisor or the Government of Canada's RDSP resources.
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