HomePersonal BankingSmall BusinessCommercialCorporate & InstitutionalAbout BMO

Benefits of an RDSP

An RDSP combines the benefits of tax-deferred investing with eligibility for government grants and bonds to provide an attractive way to build a secure financial future for a disabled person.

By maximizing government subsidies in an RDSP and earning solid investment returns, compounding investment returns can help accumulate significant assets for the beneficiary. This can help overcome the possibility that a person with a disability will have lower earnings potential and face considerable medical expenses during his or her lifetime.

Tax Deferred Growth

Tax deferral alone is a good reason to open an RDSP. Because investment returns are untaxed as long as they remain in the plan, growth potential far exceeds that of taxable investments outside an RDSP. This should result in more money for the beneficiary when it’s time to draw on the proceeds.

Payments can be withdrawn from an RDSP at any time for the benefit of the beneficiary, but the beneficiary must begin receiving payments from the plan no later than the year the beneficiary turns 60. Although contributions are not taxed upon withdrawal, investment earnings on contributions to the RDSP, as well as any government grants and bonds, are taxable when payments are withdrawn from the plan.

Government Incentives

Government grants and bonds associated with RDSPs further enhance the attractiveness of this type of plan. RDSP beneficiaries may be eligible for the federal Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB).

The federal government provides CDSG benefits based on the adult beneficiary’s net income (and spouse if applicable) and the amount of annual RDSP contributions. When the beneficiary is a minor, the CDSG is based on the net income of the beneficiary’s family and the amount of annual RDSP contributions. The lifetime maximum CDSG amount per beneficiary is $70,000.

Beneficiaries or families with a net family income lower than $41,544 are also eligible for the CDSB. RDSP contributions are not required to receive CDSB benefits. The lifetime maximum CDSB amount per beneficiary is $20,000.