A few weeks ago, I was invited to the RDSP Discussion Group hosted by Mackenzie Investments Inc. Mackenzie is the top-notch company that provides many great resources in the RDSP planning. The event was held at their professionally designed office in downtown Toronto, and all participants were advisors from the financial industry who dedicated their practices on helping families with special needs.
During our discussion, a presenter from the Mackenzie Tax & Estate department shows a very powerful example. This illustrates how one could hugely enhance and speed up their savings through the disability savings grants and bonds. Let’s go through it together now:
Tom is a 10 years old boy with prolonged physical disabilities, he has been diagnosed with this condition by his doctor since the year 2008. His doctor assisted him to fill out the T2201 form, and his disability tax credit was also approved by the CRA on the same year. Tom is living in a single family with his mother. Tom’s mother needs to spend a lot of time taking care of his daily activities, she could only afford to work part-time, hence throughout all the years, their family incomes are always lower than the first threshold on the CDSB table. (Click here to view the 2015 RDSP Income Matching Rates)
In year 2015, an RDSP account is setup, with the mother as the account holder, and Tom as the beneficiary. To catch up the carried grants from the previous years, her mother did the following:
In the above example, Tom’s mother redirect $16,500 of her savings, which leads to $38,500 of “Canada Disability Savings Grants”. But the benefits do not just stop here, because there is also the “Canada Disability Savings Bonds”. This bond provides extra benefit to low-income family, with up to $1000/year. In Tom’s example, from the year 2008 to 2018, government would deposit another $11,000 into his RDSP account, which boost the RDSP account total balance to be $55000+11000 = $66,000!
Rather than leaving the money in a regular savings account, which generate very little interest these days, this mother has successfully turned her savings of $16,500 into $66,000 in 4 years, which is a great milestone in building up the long-term savings for Tom.
Disclaimer: The above figures are obtained from Mackenzie Investments, only for illustration purposes, and not intend to provide specific financial advice. The amount of government grants and bonds one could receive depends on many factors such as the eligibility of the disability tax credit, family net income, age, therefore, they could be differed for each individual’s case. Market conditions, tax laws, and investment factors are subject to change. Individual should always consult with a financial professional before making any decision