What if there was a way to not only save money, but make some? Although the Registered Disability Savings Plan (RDSP) can help those with disabilities triple their retirement savings, it remains a largely untapped resource. In fact, more than half-a-million Canadians are likely eligible, yet only about 60,000 have opened a RDSP since the government program was launched in 2008.

Laura Mackenrot, a self-proclaimed RDSP guru, heard about the plan by word of mouth at the end of 2007. While she didn’t know much about it, given her history, she knew it would be an important part of her life.

Laura, born with severe arthritis, has been a poster child for the Arthritis Society in British Columbia since the age of four. Knowing that her future likely involved working at a desk, Laura’s goal became to attend university. But the sheer size of the University of British Columbia campus meant mobility between classes would be difficult.

To accommodate this, she attended a UBC feeder school, Langara College, which is smaller and more accessible. By age 20, she was eligible to stay in a residence at UBC and continue her studies there, despite her arthritis causing her to miss numerous classes in third and fourth year.

“I didn’t leave my dorm room for a lot of the time because I had to lie down,” says Laura. “I couldn’t carry the books. I could barely hold the pen.”

But she did it. With her left hip replaced just before graduation, Laura walked across the stage to accept her bachelor of commerce degree from the Sauder School of Business.

“I always told myself I was going to travel six months after my last surgery,” she remarks. Following her 2005 graduation and more surgeries that replaced both her right hip and knee, she hopped on a plane to travel Europe.

The trip started off great, but after travelling across various countries, something happened during a backpacking trek in Spain that would forever alter her life.

 “One of my eyes just totally went black within three weeks. I thought I was just having headaches or heat dehydration because I was backpacking, but it wasn’t that.”

Her vision quickly deteriorated due to glaucoma placing pressure on her optic nerve, triggering blindness in her right eye. Soon the other eye began to act up and Laura knew her life was about to change.

“So, instead of that trip being a taste tester of a bunch of cities I thought I would one day go back to, my trip turned into: I have to see everything as much as possible, because I will never be able to do this again.”

Now, in her thirties and completely blind, Laura sells mutual funds as an independent financial professional. She believes it’s her calling to help people with disabilities lead independent and financially secure lives, which is why she’s a firm advocate of raising awareness about the RDSP.

Getting started with DTCs

“A large chunk of people with disabilities are not aware that they are eligible to receive approximately $1,400 per year in tax credits.”

Too many people think they don’t qualify for the DTC (or Disability Tax Credit, a prerequisite for the RDSP) because of their low income or government pension. “Because of this, even though they may have heard of it, they never pursued it or tried to fill out the form, because they don’t have any income to apply that tax credit to. They say, ‘what’s the point?’”

However, the beauty of the DTC is that it's transferrable, similar to the way students can transfer their tuition credit to their families.

“In some cases, we have talked to people who’ve lived with a disability their whole lives and have never heard of the DTC. These people are eligible to claim their retroactive tax credits for up to ten years. That’s approximately $14,000 that they’re getting back in tax relief for themselves or their family.”

In order to start a RDSP, you must also qualify for the DTC, which means having a severe disability.

The power behind RDSPs

While a person can put any amount into their RDSP, Laura has a magic amount to invest each year in order to maximize the plan's benefits: $1,500 (or $125 per month).

She points out that a person who was previously unaware of the DTC now has an extra $1,400 per year in tax credits, and only needs to come up with an additional $100 to meet this magic number. Investing $1,500 per year allows them to receive up to $3,500 in RDSP government grants that year. If the person with a disability is part of a low-income household, then he or she is eligible for an additional $1,000 bond as well. That's $6,000 per year invested towards their future!

When should you start a RDSP? The sooner the better.

Someone saving $1,500 a year, properly invested, for more than 30 years, may end up with a RDSP worth over half a million dollars. It takes 20 years to maximize the grants and bonds of the RDSP and the cutoff age for those grants and bonds is 49. So start now.

Some people worry that the DTC or RDSP might affect their disability benefits, but they don’t! Receiving the DTC and putting money into a RDSP will not affect your federal or provincial disability benefits.

RDSPs are now retroactive for ten years too, back to when the plan began in 2008. So if you’ve been unaware of the RDSP, it’s not too late to claim your DTC, start a RDSP, and receive grant money for the past few years, so long as you have had your disability during that time.

Once you pass the holdback period, (meaning you can’t withdraw money until ten years after the last federal contribution),you can spend your money on whatever you want. Any personal contributions will not be taxed, but taxes will be automatically deducted from any government contribution (grant or bond) and income or growth.

Canada is the first country in the world to have a plan like the RDSP and its success over the coming years may determine if other countries adopt a similar plan. “Literally, just by saving a little bit each year, you’ll be able to save a huge sum each year that can set you up for your future,” explains Laura.

Facts and figures

For the first $500 you invest in your RDSP each year, the government will match each dollar with $3. For the next $1,000 that you contribute, the government will match each dollar with $2 in grant money.

Anyone—family, friends, neighbours—can make private contributions to the plan.

If a person is living on low income (less than $24,183/year), then they are eligible to receive the Canada Disability Savings Bond. This is an additional $1,000 each year, for up to 20 years. Partial bonds are available for people with an income between $24,183 and $41,544.

A person can put in more than $1,500 per year if they want, up to $200,000 in their lifetime. The federal government will contribute up to $70,000 in grant money over a person’s lifetime.

If the federal government contributed more to your RDSP than you (combined with your family and friends), then there is a limit to how much money you can withdraw each year: the money in your RDSP divided by the number of years before you turn 83.