Registered Disability Savings Plan (RDSP): Building Long Term Savings

What It Is

The Registered Disability Savings Plan (RDSP) is a federal savings plan, introduced in 2008, that allows families to save for a child with a disability while receiving government contributions from the federal government. It works in a similar way to a RESP: money is contributed into the plan, investments grow tax deferred inside it, and the government adds grants and bonds on top of the contributions. The lifetime contribution limit is $200,000 with no annual cap. Contributions are not tax deductible, but all investment growth is sheltered from tax until withdrawn. RDSP assets do not count toward the $40,000 asset limit for ODSP, making it one of the few ways to build substantial savings while keeping government benefits in place.

Who Is Eligible

To open an RDSP, the person needs an approved Disability Tax Credit (DTC), a Social Insurance Number, Canadian residency, and to be under 60 years old. A parent can open the plan as soon as the DTC is approved and acts as plan holder while the child is a minor. When the child turns 18, if their ability to manage a contract is in question, the parent can continue as plan holder under a qualifying family member provision. This provision is available until the end of 2026.Plans already opened under the provision will remain valid. Anyone can contribute to the RDSP with the plan holder’s written permission, including grandparents, extended family, and friends.

How Government Matching Works

The federal government contributes to the RDSP in two ways: matching grants (the Canada Disability Savings Grant) and income tested bonds (the Canada Disability Savings Bond). Grants and bonds are available until the end of the year the person turns 49, and the lifetime maximums are $70,000 in grants and $20,000 in bonds. After age 49, contributions can still be made until age 59 but without government matching.

The amount of matching depends on family income, with a two-year lag (the income from 2024 is used for 2026). While a child is under 19, income is based on the parent’s income as the primary caregiver. From the year the child turns 19, the calculation switches to the child’s own income. For many adults with developmental disabilities who have little or no personal income, this switch often means they qualify for the highest matching rates, even if the parent’s income was above the threshold during childhood.

Lower income families (adjusted family net income at or below about $114,750 for 2026): the first $500 contributed is matched at 300%, which means the government adds $1,500. The next $1,000 contributed is matched at 200%, which means the government adds $2,000. In total, a $1,500 contribution brings in $3,500 in grants, which is the maximum annual grant at this income level.

Higher income families (above the threshold): the first $1,000 contributed is matched at 100%, which means the government adds $1,000. That is the maximum annual grant at this income level.

Canada Disability Savings Bond: If the relevant family income is below about $36,500, the RDSP receives the full $1,000 bond per year with no contribution required. Between about $36,500 and $57,375, a partial bond is paid. The bond is deposited directly by the government into the RDSP. The plan needs to be open, and the bond applied for through the financial institution for the deposit to happen.

If the RDSP is not opened early or contributions are not made every year, unused grant and bond entitlements can be carried forward for up to 10 years and caught up in later years through larger contributions. The maximum annual grant including carry forward is $10,500, and the maximum annual bond including carry forward is $11,000, with catch up amounts applied to the oldest missed years first.

The 10 Year Rule and Withdrawals

The RDSP is designed as a long-term plan. If money is taken out within 10 years of the last government grant or bond deposit, some of those government funds need to be repaid. The repayment works on a 3 to 1 basis: for every $1 withdrawn, $3 of grants and bonds received in the preceding 10 years must be returned to the government, up to the total amount received in that period. Personal contributions and investment earnings are not affected by this rule and belong to the beneficiary regardless of when they are withdrawn.

Since grant eligibility ends the year, a person turns 49, withdrawals free from any repayment obligation would begin at age 59.  Note mandatory withdrawals start at age 60.  Lump sum withdrawals can also be made. Each withdrawal includes a proportional mix of original contributions, grants, bonds, and investment earnings. The original contributions come out tax free, while the grants, bonds, and investment earnings are treated as taxable income for the beneficiary. Because most RDSP beneficiaries have low income, the actual tax owed is often small.

What It Costs

There is no government fee to open or maintain an RDSP. The financial institution holding the plan may charge investment management fees depending on the account type and investments chosen. Not all financial institutions offer RDSPs, and before selecting one it is worth asking specifically about what investments are available, what the annual fees are, how withdrawals are processed, and whether staff are familiar with the program rules.

Practical Considerations

Opening the RDSP as early as possible is worthwhile even without an immediate contribution, because the bond can be deposited without any contribution from the family and carry forward entitlements only begin accumulating once the plan exists.

Because the income used for grant and bond calculations shifts from the parent’s income to the child’s own income at age 19, the parent’s tax return is what needs to be filed while the child is under 19. Filing a first return for the child around age 17 means the data is in place by the time the switch happens, and the child’s return should be filed every year from that point on.

If there is an RESP for the child and they are not going to pursue post-secondary education, the accumulated income may be transferable to the RDSP under certain conditions. The rules are specific and worth discussing with a financial advisor.