Q: I have chronic pain and a friend told me I may be able to register for a savings plan where the government will match my contributions by up to 300 per cent. How do I know if I qualify?
A: The registered disability savings plan (RDSP) is a long-term savings plan to help people with disabilities save for the future. It’s a great tool that’s extremely underutilized. According to the Canada Disability Savings Program’s 2024 annual report, only 34 per cent of eligible Canadians had opened an RDSP — meaning 66 per cent of people with disabilities (including chronic illnesses and mental health conditions) are missing out on valuable government grants and bonds with matching contributions of up to 300 per cent.
“Government contributions combined with investment income make the RDSP a great tool to help you save for the future, much like creating a pension for yourself,” says Alison Izat, a certified financial planner and board treasurer for Plan Institute, a national non-profit that supports people with disabilities.
The first step in opening an RDSP is applying for the Disability Tax Credit (DTC) — probably the most complicated part of the process. After filling out the first part of form T2201, your doctor or another medical practitioner will need to complete the second part and certify that your disability causes marked restrictions in your daily life. Not all chronic pain or mental health diagnoses meet the threshold, and applications can be denied. Plan Institute offers free help with this process through its Disability Planning Helpline. The Disability Tax Credit reduces the amount of taxes you or a supporting family member owe and unlocks other benefits such as the Canada Disability Benefit (CDB) and, in some cases, the Canada Workers Benefit (CWB).
If you’re approved for the Disability Tax Credit, are a Canadian resident and have a valid social insurance number, you’re eligible to open an RDSP. A parent or legal guardian can also open an RDSP for a child. “It’s important to do your research and choose an institution that provides the investment and withdrawal options that work best for you,” Izat says.
The lifetime contribution limit is $200,000 with no annual cap. The account can also generate unlimited investment income, so you can significantly grow your savings by the time withdrawals start at age 60. Plan Institute’s RDSP calculator can help you determine the potential future amount.
One of the best things about the RDSP is the generous government contributions. The Canada Disability Savings Grant will match RDSP contributions by 100 per cent, 200 per cent or 300 per cent, depending on your income. That’s up to $3 for every $1 you contribute. The maximum yearly grant amount is $3,500, with a lifetime limit of $70,000.
Those with low or modest incomes may also qualify for the Canada Disability Savings Bond, which doesn’t require any contributions to receive. “This is a great way to start saving if you have a low income,” Izat says. The maximum yearly amount you can get from the bond is $1,000 with a lifetime limit of $20,000.
You can also receive retroactive grants and bonds for any of the past 10 years that you were eligible for the DTC before opening an RDSP.
You can open an RDSP and make contributions until the end of the year you turn 59, though government contributions stop after the year you turn 49. Regular withdrawals — called lifetime disability assistance payments — must begin by the end of the year you turn 60.
Withdrawing money before age 60 may require repaying some or all grant and bond amounts, unless the last government contribution was made more than 10 years ago or you have a reduced life expectancy of five years or less. Grants and bonds may also need to be repaid if an RDSP is deregistered, closed for a reason other than a transfer or the beneficiary dies.
Contributions are made with after-tax dollars, and investment growth inside the plan is tax-sheltered. Grants, bonds and investment growth are taxable when withdrawn.
If you have questions about the Disability Tax Credit or RDSP, you can reach out to Plan Institute’s Disability Planning Helpline.
Money Coach is a biweekly feature that helps Canadians find helpful solutions to personal finance challenges. If you have a question, email Lora at [email protected].
