RDSPs a ‘no-brainer’ savings tool for people with disabilities

After recently graduating from college with an advanced diploma in graphic design, Hannah Remillard knows launching her career will likely come with personal challenges.

For the 23-year-old, who was diagnosed with autism as a teen after a diagnosis of selective mutism years earlier, she says her main difficulties revolve around verbal communication and socializing with her peers.

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“I could face financial challenges in regards to the limitations that I can experience,” she said in a recent interview via email.

“For example, at times I have become incapacitated due to stress and require extensive time to recuperate. This could impact my employer’s ability to provide the support I require.”

Remillard and her family started preparing for financial supports back in high school, when she opened a Registered Disability Savings Plan. Like a Registered Retirement Savings Plan, the RDSP is a long-term savings account where contributions grow tax-free until withdrawal. RDSPs are specifically geared toward supporting those with disabilities.

Those approved for the federal Disability Tax Credit are eligible for the plan, which allows them to also receive grants and bonds from the federal government that help with long-term savings.

Personal finance experts say it’s an underutilized tool they highly recommend for people with disabilities, especially among those whose challenges increase the likelihood of encountering financial barriers in life.

“I recommend others to open an RDSP if they’re able to afford even the smallest amount because the government rewards contributions generously,” said Remillard, who saves $125 each month to contribute to the plan.

“The idea is to make life more manageable when we face hardships with career changes, job security, aging, and/or medical ailments.”

An RDSP account holder, along with anyone who has their written permission, can put money into the plan until the year they turn 59. While there is no annual contribution limit, there is a lifetime maximum of $200,000.

Grants and bonds received from the government do not count toward the contribution limit. Those include the Canada Disability Savings Grant — money the government deposits into an RDSP to match contributions, with a maximum of up to $3,500 per year and $70,000 over the recipient’s lifetime, until the year they turn 49. Beneficiaries with lower family income receive more grant money than those with higher family income.

The government also deposits a Canada Disability Savings Bond of up to $1,000 a year, and $20,000 in total, into the RDSPs of low- and modest-income Canadians, with no requirement for the recipient to contribute money to receive support.

“It is a misconception that you need money to invest in an RDSP. They are really powerful at all income levels,” said Tanya Postlewaite, vice-president of credit union services at Equitable Bank.

“People should not be deterred if they don’t have their own financial means to be investing within the RDSP because they can see their investments grow with the benefit of the government grants and bonds.”

Having an RDSP does not affect eligibility for federal government benefits. Provinces and territories also fully or partially exempt RDSPs from the calculation for income assistance payments.

For those who qualify, opening an RDSP is a “no-brainer,” said Frank Gasper, owner and president of CSR Wealth Management.

“What we try to explain to clients is that, ‘Listen, this is free money and this is a long-term pension plan-style program,” he said.

Gasper, who specializes in educating clients on the RDSP, said he often deals with clients in their 30s and 40s who don’t know the Disability Tax Credit is available to them.

Eligibility for that support depends on having a mental or physical disability that is expected to last, or has lasted, at least one year. Those who are blind, require extensive therapy or treatment, or are limited in common daily activities can also apply to receive the credit.

“Really, the biggest challenge we have is awareness for both programs and one begets the other,” he said.

Postlewaite said recent survey findings from Concentra Trust and Equitable Bank revealed a critical gap in Canadians’ awareness of the plan.

Only 21 per cent of those living with a disability, and 17 per cent of Canadians overall, are aware of RDSPs — the lowest awareness rate among all registered accounts. By contrast, she said 86 per cent had heard of RRSPs, TFSAs and other savings products.

“I think that if there was more education on the benefits of an RDSP, there would be much more uptake,” said Postlewaite.

“The RDSP is very specialized for those who qualify for disabilities, and the grant and bond program is unmatched with any other registered savings plan. So it really is the most powerful tool for individuals with disability to see their savings grow.”

This report by The Canadian Press was first published Jan. 2, 2025.

Sammy Hudes, The Canadian Press