Get started on your Application now!Top Ten List – Revised
Vote for your own top ten list here!
After much research, discussion and deliberation, I completed my submission of recommendation to improve the Registered Disability Savings Plan. Obviously with approximately $450 million in 50,000 plans, the RDSP must be looked at as stunning success. Few social programs can claim such immediate impact.
At the same time, with an estimated 500,000 who should qualify, we must ask, “Why aren’t more people using RDSPs to save for their future?” Kudos to Minister Flaherty not only for championing the plan but also acknowledging that it can be improved.
The discussion is drawing to a close as officials in Finance Canada sift through submissions and decide how to make the RDSP more useful for Canadians with disabilities. Below is my ranked “Top 10″ list of recommendations – revised.
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Reduce the holdback amount to five years
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Permit emergency withdrawals without repayment of the holdback amount
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Do not collapse the RDSPs of people who lose their eligibility for the disability tax credit
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Implement a federal solution to allow access to people don’t have contractual capacity
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Permit the life expectancy in the LDAP formula to be determined a physician
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Make a beneficiary’s primary residence an RDSP investment option
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Permit the rollover of beneficiary’s RRSPs to RDSPs
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Enable people with progressive diseases to qualify for RDSPs before they qualify for the DTC
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Allow child welfare authorities to act as account holder of RDSPs until the beneficiary is 25 years
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Allow financial institutions to charge management fees on the holdback amount.
You can agree or disagree by voting for your own top ten list here.
You can see the results after you vote.
I will publish the final results in two weeks (January 20th).
lower the holdback time to 5yrs
increase the term of contribution time from 49yrs to 60yrs of age
allow funds to stay even if status is lost
Hello: I am 47 years old and have an RDSP with BMO. I am advocating to raise the age restriction of receiving the grant/bond from age 49 to a higher limit say 60 years old.
I have a family, two kids and a wife, and it would make a big difference for my retirement funds if the age range for the grant/bond was increased from the current range of 49 years old.
Thank-you,
Paul Bhushan,
Ph. 604-501-2522
Thanks for your comment, Paul.
Like Paul and Sheldon, I am all for increasing the contribution age. Many of us didn’t have many years to contribute and to benefit from the grant/bond program, even though, in my husband’s and mine situation, we have had cerebral palsy for life. Also, lower the holdback time.
Thanks Glenda. I certainly understand how the program would be more valuable to people who are older if the time to receive Grants and Bonds were extended. To see a great program that would really make a difference in your life if you were 20 years younger or if the timelines were extended must be really frustrating and seem unfair.
First, thank you for the information you provide, Jack. I am concerned about my future and have not started an RDSP. I was diagnosed with severe adult ADHD in recent years and qualified for the disability tax credit until 2014. My mental disability going so long undiagnosed has been directly responsible for my current financial as well as social dysfunction. I have never been able to hold a job and therefore own a home, or save for retirement. With medication and therapy I may lose disability status and indeed, become more financially stable and start saving for a home and retirement.
Is there any use in starting an RDSP knowing I may overcome my disabilities? Will I lose everything I put into it if I lose my status? I feel I have lost 25 years of good quality of life due to this terrible mental state, and now that I have discovered ways to repair it I am looking at a future hindered by the loss of that time I could have been contributing to an RRSP.
Thanks again,
Ken
I hope the issue of the RDSP holder losing half the fund to ex-spouse upon divorce is being looked at. CRA says the RDSP is considered with other assets and the person with disability is not protected from losing it. This is clearly not the intent of the legislation.
Thanks Susan. It’s definitely an area that some people are concerned about. I’m not a lawyer but will try and get some additional information. From my limited knowledge, I think that judges would look at situations individually. For example, if spouses lived together for many years and income from both was contributed to the RDSP, the ruling would be different than if a spouse came into a relationship already having a significant RDSP asset. That being said, I think you are correct, the RDSP is like an individual pension plan and as such is not an asset that should have to be collapsed and divided in a divorce.
I agree with all of your proposals except number ten, and that is because I do not fully understand justification.
I have the same concern as Susan. I starated my son’s RDSP before the age of majority confident it will be an asset for him in the future. I am currently the account holder and manager, he has met a girl who I am sure is after the RDSP which has to this date has only my financial investment. I am not confident the relationship will last long term but she is pushing for marriage.
I have also been informed that he can become holder and manager at any time. His current girl friend has complete control of his money and worry about her controling the RDSP, as she does not have good financial sense. I think there should be some input from the original account holder and manager to say when the account can be transferred over to the beneficiary. I would worry less if it was protected in the case of seperation or divorce.
THank you Anne Marie
I have the same concerns as Susan. I have been the sole contributer to my son’s RDSP. He is currently in a relationship and she is pushing for marriage, many people feel prematurly. Some who know her feel she is after the RDSP.
As I have started the RDSP prior to the age of maturity I am currently the account holder and the account manager. I have been told that he can transfer management and holding to himself at any time. As his current girlfriend has complete control of his money and taking advantage of his dissabilities I am concerned about him transferring the account management and holding to himself for her control. I feel that the original account holder and manager should have the ability to have input as to when the account managment and holding can be transferred
Thank you Anne Marie
Anne Marie: I disagree, if he is mentally capable he needs to make his own mistakes. If he has mental difficulties, you should get power of attorney.
My husband and I have both been disabled for over 20 years, receiving CPP disability benefits. When RDSP started, unfortunately, I was 59 and ineligible, but my husband was eligible, as he was 43 at the time. With great difficulty, we contributed what we could each year, a sacrifice for both of us. However, if he were to die before me, I would only receive what we had contributed, with minimal interest paid. I think the age one can contribute should be raised. Because I would not be able to inherit most the of RDSP, my husband will withdraw all of it when he is 60, regardless of income tax to be paid. Luckily, I will be receiving OAS & GIS before then.
Deanna,
Thanks for your comment. I am not sure but I think you may have a couple of misconceptions about the RDSP….
1. You can inherit all of your husband’s RDSP, except for the holdback amount (that’s the amount the federal government contributed in the previous 10 years). At 60 the holdback amount will be 0 and so you can inherit all of the RDSP including the government contributions.
2. Your husband doesn’t have to wait until 60 to start withdrawals, although if he doesn’t he might have to repay some of the money from the government.
3. At 60, unless you and he have put in more than the government, he will not be able to withdraw the entire amount. He will be limited to LDAP payments – see the website for more details.
Thanks for your reply, jackstyan. We weren’t aware that I could eventually inherit all of my husband’s RDSP (altho he’ll likely outlive me!). Thanks for that info. He will wait till 60 to start withdrawals so he won’t lose any of the govt contributions.
Is there any estimate/forecast of when the gov’t will complete their review of the RDSP?
I am 59 and will be 60 on July 22, 2012. Just a few months now. The bank is not accepting contributions to my plan as of January 1, 2012 (or December 31, 2011). Is the contribution up to the end of the year I turn 59 which would be December 31, 2011. Or would it be until July 31, 2012 which is the month I actually turn 60.
Then is it more beneficial for me to withdraw what’s in there which is only $2-3,000 to pay off some bills or wait and get about $125 ever year?
Thank you,
Pat Cunningham
Pat – great questions. The easy one first. You can only contribute up until the end of the year (December 31st) of the year you turn 59. So your birth year is important but not your birthday.
The more difficult one is the financial decision about withdrawing to pay off bills versus taking revenue. It’s hard to answer without knowing a lot of things, like are you paying interest on the bills you owe? How much? How much do you owe? what income do you have? How else are you going to pay off your bills? I do know that if your debt is on a credit card and you are paying more than 5% interest on your debt that most financial planners will tell you to get your debt paid off first.