Despite the incredible value a Registered Disability Savings Plan (RDSP) can offer, very few eligible people have opened one. Why? Probably because many people do not know about it or do not understand how it works or the value it offers. If you are one who doesn’t know about it or not sure if it is worth the effort to understand it, I think you should read on.
For people who are not familiar with the RDSP, here is a very short, high level description of the value the RDSP provides without much detail. My point is not to explain the details of the RDSP; it is to help you determine if it can provide you or someone close to you with enough value to pursue it or not.
To put it simply, if you have a disability, qualify for the RDSP and deposit money into your account, the federal government will contribute to the account as well, often times much more than you ever will.
Here is an example. If parents, earning $68,000 in annual income, have a 10 year old child with a disability, and they deposit $1,500 into an RDSP account for their child, the government will contribute $3,500 (called a grant) as well. After contributing every year for 20 years, the parents have deposited a total of $30,000 and the government has deposited $70,000. That is a 233% return on investment. I do not know of another dependable source that will provide such a significant return on your money and I don’t believe anyone else does either.
Also, for families that earn a very small income, less than $24,000 a year, the government will automatically deposit $1,000 (called a bond) every year and the families are not required to make a deposit to secure the bond. The maximum amount of bond contributions the government will contribute over a person’s lifetime is $20,000.
Ultimately, somebody with an RDSP account can accumulate up to $90,000 in contributions from the federal government. Add in the $30,000 of personal contributions and you have $120,000 in combined contributions.
If you invest that money wisely – yes, you can invest the money, rather than let it sit in a savings account – and earn a reasonable return, the account could be worth over $300,000 when it comes time to start withdrawing the money later in life (remember, the RDSP was created for long-term savings).
In addition to being one of the most valuable registered plans assembled by the feds, it is also the most complicated. However, if you qualify for the Registered Disability Savings Plan, I do not see a reason why you should not pursue it. A reason might exist, but I have not seen it yet.