The Power Of The RDSP – Part 1

Joey is a 6 year old boy with autism. His parents applied for the Disability Tax Credit using the T2201 guide (pdf) available on this website. They were very careful with their application and the Canada Revenue Agency (CRA) agreed that Joey had been disabled from birth.

Joey’s parents are in a low income bracket with a taxable income of only $23,000. They worked hard to ensure Joey received the maximum benefit from the B.C. Autism Funding and took advantage of some tax breaks due to Joey’s disability. Having taken care of their son as best they were able, they now became concerned for his financial future after they died. Unfortunately they had no available funds for a Registered Disability Savings Plan (RDSP), but they opened an account anyway.

Question: How much would Joey’s RDSP be worth when he is age 50 if no one made a single contribution to his account?

Choose from:

  1. $45,587
  2. $83,386 or
  3. $147,296

Let’s go through the math using the online RDSP Calculator.

  • The family income is below $25,356 so the government will contribute a $1,000 bond every year with no matching contribution
  • Backdated bonds will be automatically deposited back to 2008 when the RDSP was introduced or when Joey ‘s disability started (according to the CRA)
  • Joey’s parents invest the funds in simple low cost mutual funds using guidance from the Canadian Couch Potato
  • They conservatively estimate that the rate of return will average 5%

So what will be the account balance when Joey turns 50?

Answer: $147,296

Not only is that a lot of money, but the proceeds are exempt from clawing back any disability benefits (at least in B.C.) that Joey will be receiving as an adult.

My question to you is: If you haven’t opened an RDSP, what is stopping you?

2 thoughts on “The Power Of The RDSP – Part 1”

  1. I have never heard of a bond that the government gives you without a contribution. How can I find out about this?

    1. This is one of the exciting aspects of the RDSP. It used to be that only the well off could save money for their disabled child’s future. With the advent of the RDSP, everyone can have a plan.

      RDSP.com is the official source, but basically if your net income is below $25,356 (this changes every year) all you have to do is open an RDSP and the government will contribute a $1,000 bond. If your income falls between $25,356 and $43,561, you will receive a partial bond.

      It’s such an incredible benefit that I am continually amazed that there are people with disabled children who have not opened an RDSP.

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