People who live with severe and prolonged physical or cognitive impairments often have higher healthcare and living expenses. Building financial security for individuals with disabilities can therefore present unique challenges. Although there are different methods of saving and investing, and different accounts available for this purpose, the most advantageous strategy often involves a Registered Disability Savings Plan (RDSP).

Don't miss the RDSP opportunity 

An RDSP is a tax-sheltered investment account designed to help Canadians with disabilities save and invest for their long-term financial security. The plan can be an effective tool to help families cover costs, build a meaningful retirement income stream, and achieve financial security and peace of mind. Yet, the most recent data from Statistics Canada indicates that, as of 2020, less than one-third (about 31.5%) of those eligible to open an RDSP have actually done so. Why? It seems many are simply unaware of the plan. In fact, almost half of those eligible who had not opened an RDSP say they have never even heard of it. That's a shame, as government contributions can potentially reach upwards of $90,000 in available grants and bonds.

Key benefits of an RDSP

Key benefits of an RDSP include:

• Tax-deferred growth – When you invest in an RDSP, your investments grow on a tax-deferred basis while the funds are in the account. Although investment earnings are taxable when withdrawn, the tax-sheltered growth in the account can greatly increase your returns over time.
• Government contributions – To encourage families and individuals with disabilities to invest for their futures, the federal government offers generous bonds and matching grants for qualifying families, up to specific limits. These grants and bonds can help you save even more.
• Flexible spending – RDSP accounts are designed to support the long-term financial needs of individuals with disabilities, and can be used to fund future healthcare expenses, retirement income, other living costs, and virtually anything the beneficiary needs.

Who can open an RDSP?

To be eligible to open an RDSP, an individual must be a Canadian resident under the age of 60, must have a valid Social Insurance Number (SIN), and must be approved for the federal Disability Tax Credit (DTC). You can open and manage your own RDSP if you’re an adult (age 18 or 19, depending on your province) and capable of managing your own finances independently. If not, another person can open an account on behalf of the disabled individual, subject to certain criteria.

An RDSP can be a powerful tool for securing long-term financial stability, yet the accounts are somewhat complex with many features and benefits and may not be appropriate for all situations. To find out more about RDSPs, visit our RDSP website and speak with your Edward Jones financial advisor today to find out if an RDSP can be a meaningful part of your overall financial strategy.