Registered Disability Savings Plan (RDSP)
RDSP’s can be a very large part of the financial future and well being of an individual with Special Needs. The government is offering free money for the retirement of Special Needs individuals. Take a look at the two scenarios below and see what an RDSP could mean with minimal contributions that will maximize the government grant and bond money available.
Jonathan was born in 2014 with a severe disability and his parents (Julie and Robert) applied and received the Disability Tax Credit. They opened up an RDSP with a $1,500 contribution in 2014, and contributed another $1,500 annually every January for 19 years. When Jonathan turned 20, his parents had contributed $30,000 into his RDSP, the government had contributed $70,000 in grant money, and $2,000 of bond money with an additional $1,000 of bond contributed by the government each year for another 18 years. By age 60, Jonathan would have $1,323,678 in his RDSP.
Jonathan, Age 26, has a severe disability and his parents (Julie and Robert) biggest concern is what will happen to him when they are no longer able to care for him. While they do not have a large amount of disposable income, we found a way so that Julie and Robert could contribute into an RDSP for him. Since the RDSPs were started in 2008, we were able to carry forward grant eligibility for 7 years and take advantage of the grants from day 1. Julie and Robert contributed $3,500, the government in return provided grant money of $10,500 and bond money of $7,000. After having contributed just $3,500, Jonathan’s RDSP was now worth $21,000. In the following two years, Julie and Robert contributed $5,000 and the government provided grant money of $10,500 and bond money of $1,000 EACH year. After just 3 years, Julie and Robert had contributed $13,500 and based upon a 5% rate of return Jonathan’s RDSP was now worth $59,826.38. For the next 11 years Julie and Robert contributed $1,500 and the government provided grant money of $3,500 and bond money of $1,000 each year. Based upon an assumed rate of return of 5%, Jonathan’s RDSP would be worth $191,826.16 at age 39 and Julie and Robert would have contributed only $30,000 of that. Can you imagine receiving a greater return on your money? And the best part is that payments from the RDSP will not impact any government income tested benefits.
*Both scenarios above are based upon a 5% rate of return.
The RDSP rules are extremely complex. Let us help you navigate your way and ensure that you have an RDSP that maximizes the grant and bond money available and takes advantage of the other benefits that come with an RDSP that your current Financial Advisor may not know about.