The RDSP Explained: Myths, Facts, and Financial Planning Strategies [Part 1 of a 4-Part Series]
RDSP Explained Blog Post

Authors:  Betty-Anne Howard and Jackie Power, Mackenzie Investments.

In this first installment of our 4 part series – The RDSP Explained – we discuss Registerd Disability Savings Plan Canada myths, facts, and financial planning strategies for Canadians who want to receive disability benefits and tax relief.

Why explain the RDSP Grant Canada?

Amanda Leduc in her brilliant book Disfigured: On Fairy Tales, Disability and Making Space, uses a vastly different lens to discuss the needs of the disability community. She starts with how much we need society to change to address the many barriers facing people with disabilities in our communities.

Her approach, which we wholeheartedly agree with, is that we need to recognize that we have a responsibility toward everyone in our society, “up to and including the need to consider how best to meet the varying needs of different bodies”.

The stories we have been told, the narratives we’ve heard and shared about people with disabilities need to be changed to “narratives that change the world so everyone can win.”

Financial Services Can Be Intimidating

In addition to the societal barriers being constantly faced by the disability community, there are severe economic and financial barriers as well.  We want to share with you methods, mechanisms, and investment vehicles that can help address these barriers.

We recognize that financial services (the world we work in) can be intimidating, alienating, and difficult to understand and we want to change that with this series of articles. 

Our intention is to demystify the financial vehicles available to you with the hope of helping you gain better access to these tools, starting with the myths and misconceptions we have encountered throughout our combined almost half a century of helping Canadians sort out the best way forward in addressing their needs both now and in the future.  

The RDSP Grant Explained:  Myths and Misconceptions

In the first installment of our series, let’s look at some common myths and misconceptions about the Registered Disability Savings Plan:

RDSP Canada Myth #1 – You have to be a minor to set up an RDSP

Betty-Anne:

Jackie, you mentioned that when it comes to setting up the investment vehicle intended to help support individuals and families who have disabilities (ie – a Registered Disability Savings Plan, or RDSP Canada), the most common misconception is that it’s for minors?

Jackie:

I’ve had conversations with people who didn’t realize that they didn’t have to be a minor to be eligible or even to benefit from the RDSP.  This is an excellent account type that in my opinion is underutilized by Canadians because many people who are eligible simply don’t realize they could set up an account.

Betty-Anne:

Yes, there seems to be a lot of confusion about who is eligible for these RDSP Canada plans, we have a range in ages for the families who we’ve set these up for from age 8 to a 21-year-old and a 40-year-old, for example.  What is the cut-off age?

Jackie:

Someone can set up an RDSP until December 31st of the year they turn 59.  A beneficiary is eligible for an RDSP grant and/or bond up until December 31st of the year they turn 49.

RDSP Canada Myth #2 – If you’re working, you’re not eligible for the RDSP

Jackie: 

Many people believe that if they are working, they’re not eligible for the RDSP grant, and that is simply not the case.  You can work full time and be able to open an RDSP grant as long as you meet the eligibility requirements.

The RDSP Canada eligibility requirements are:

  • You must be eligible for the Disability Tax Credit (DTC)
  • You must be a Canadian resident
  • You must have a valid social insurance number
  • You can open your RDSP until December 31st of the year you turn 59.
RDSP for Canadians

RDSP Canada Myth #3 – If you qualify for the Ontario Disability Support Program (ODSP) you automatically also qualify for the Disability Tax Credit (DTC).

Betty-Anne:

The Ontario Disability Support Program seems to be another area that people get confused by.  How does it fit in with the Disability Tax Credit, and what are the common misconceptions?

Jackie:

Many people believe that if they are eligible for ODSP they will automatically be eligible for the DTC and that is simply not the case.  Generally, it’s harder to get the DTC than it is to get ODSP.  

With that said, the 2021 Budget has proposed to widen the qualifications defining mental capacity and functions, as well as life-sustaining therapy which will increase the number of Canadians who will qualify for the DTC.

What’s Next In This RDSP Grant Series?

As you can see the RDSP is complex and has a lot of moving parts, and this information is just the tip of the iceberg.  This article and the next one are designed to help you understand some of the misconceptions that exist with respect to RDSP Canada. 

Part 2 discusses the myths and misconceptions surrounding withdrawals from an RDSP.

The 3rd and 4th articles in our series will discuss disability benefits, tax relief, and strategic financial planning.

Stay tuned for part 3 and 4 coming in September and October 2021!

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