RDSP for over 50+, is it worth to open

[vasilva]

Recently I was approved for DTC starting from 2016.
I am researching, if it is worth to open RDSP as I am over 50.
So far I found no distinct answer.
Does anybody on this forum have opened RDSP (being over 50) and what are the benefits, since no grants or bonds can be received from Government.
Thank you

[Caro]

It probably depends on whether or not you will be relying on income-tested programs and on how you invest.

Income from an RDSP is ignored for many government programs that are for low income people.

Gains aren’t taxed until the income is withdrawn, so you get tax free growth. But when you do withdraw the money as far as I can tell the gains (not the original contribution) are taxed as income instead of at the capital gains 50% inclusion rate. If you invest in something like GICs then it’s helpful. If you invest in something like a stock index fund that you plan to hold until retirement rather than buying and selling then you may be worse off. It will shelter the dividends from immediate taxation but capital gains will be taxed as income.

RDSPs also eventually have mandatory minimum withdrawals so you have less flexibility to choose when to take gains.

So. If the disabled person isn’t going to have much other income they’re better off having the RDSP. If they will have income two tax brackets higher than the personal exemption they may still be better off with the RDSP depending on how they invest and how often their investments will have a taxable event (likely for someone who worked long enough to get significant CPP when they retire). If they have a lot of CPP credits and personal savings and if they are a buy and hold equity investor then they are probably better off staying outside of their RDSP once they stop getting the grants and bonds.

(Also I was never entirely clear on whether they would give you the backdated government credits for the years you were under 49 if you were young enough in 2016.)

[Amethyst]

@Adam also posted what I believe to be a clear and comprehensive explanation on this forum thread:

DTC eligible length

Unfortunately, no bonds or grants can be paid after age 49 under any circumstances. Had you opened the RDSP at age 49, you could have retroactively been eligible for grants and bonds (up to a max of $10,500 a year), but at 50 you are not eligible for anything. The reason for this is because of the 10 year clawback rule and the age of 60. If you contributed money at, say, age 51, then at age 60 you would lose that grant money because of the clawback.

Hth

[vasilva]

Thank you for your responses.
I will check the link.

[DisabledCamGirl]

Here is information from Plan Institute. They host webinars regularly on the RDSP and are amazing at answering questions.

RDSP Q & A: Is it worthwhile opening an RDSP after 50? - RDSP They also have a PDF document online with quick notes. I search RDSP over 50 and it came up from their website.

The Registered Disability Savings Plan (RDSP) - Plan Institute

An RDSP can be opened up until the year in which you turn 59. Government contributions in the form of grants and bonds stop in the year in which you turn 49. Having an RDSP after 50 can be a great way to save and invest money without having your disability benefits impacted .