What are the investment choices for RDSP?
Generally speaking, the investments that are eligible for the Registered Retirement Savings Plan (RRSP) and Registered Education Savings Plan (RESP) are also qualified to be put into RDSP. They include cash, stocks, bonds, GIC, mutual funds, and others. It is extremely important to ensure that the assets are appropriate for the RDSP. According to the CRA,
“The amount of tax payable for a non-qualified investment is:
- 50% of the fair market value (FMV) of the property when it was acquired; and
- 50% of the FMV of the property immediately before it stopped being a qualified investment for the trust.”
[Image Courtesy Grant Cochrane/ FreeDigitalPhotos.net]
RDSP is for long-term savings. Unless due to urgent needs of money, the funding is very unlikely to be withdrawn in the short run. Especially there is clawback on the government grants and bonds for contribution that are made in the previous 10 years. Rather than just having the money sitting in cash, and not receiving too much interest income, I continue to believe the best strategy for investors is to take a long-term view, investing with care in a portfolio that is well diversified by asset class, geography and industry sector and which suits your tolerance for risk.
Currently, not every financial institutions are offering to administer RDSP accounts and for those who does, not all of their investment products lineup are accessible by this plan. I will continue to raise this issue to investment companies, and hopefully families with special needs can have a wider investment choices for their long-term savings.