All Canadians deserve the opportunity to create a secure financial future. Yet the gaps in employment and income affecting people with disabilities mean a number of Canadians struggle to round up the financial resources needed to achieve financial peace of mind.
According to the most recent data from Statistics Canada, 6.2 million people nationwide live with a disability. Of that number, only 59.4 per cent were employed in 2015, compared to 80.1 per cent of the rest of the population. The Government of Canada reports there are currently 645,000 Canadians with disabilities who have the potential to work in an inclusive labour market and are not currently working.
For those who do find work, Canadians with disabilities historically have been in lower-paying and often more unstable, at-risk jobs, making it difficult sometimes to make ends meet.
While there is still a great deal of work to do to close gaps in employment and income between Canadians with disabilities and those without, there are plans and programs available that are designed to help address financial inequality. One of the most robust is the Registered Disability Savings Plan (RDSP) — a national registered plan that helps Canadians with disabilities and their families save for the future.
Registered Disability Savings Plan (RDSP)
Designed as a long-term savings plan to help Canadians with disabilities (and their families), the RDSP comes with government grants and bonds to help build an individual’s savings. For instance, the Federal Government will match contributions up to $70,000 in Canada Disability Savings Grants, and low-income families may qualify for additional help of up to $20,000 in Canada Disability Savings Bonds.
“The RDSP is a valuable savings plan in part because of the grants and bonds provided by the government, and in part, because tax is deferred on investment income and capital gains earned,” says RBC Investment & Retirement Planner Marco Imbrogno. “These factors help the plan to grow faster.”
Income earned or withdrawn from the RDSP doesn’t reduce other disability payments, nor does it have to be returned should the plan holder’s income rise above a certain level. Anyone can contribute to the RDSP (the plan holder, family members or friends), and you don’t need to be working in order to save for the future — contributions to the plan are not based on income or employment.
“This is an important benefit, as unemployment shouldn’t preclude someone from investing in the future,” says Joel Dembe, former Paralympian, Manager of Corporate Communications at RBC and co-chair of the REACH Employee Resource Group.
Joel says the savings plan has given him financial peace of mind over the years. “I started investing in my RDSP in 2009 and had just graduated from university. Seeing what it’s done over time has been a huge relief in the background, knowing that I am saving for my retirement. Many people with disabilities don’t have income or access to savings — the RDSP helps build that.”
If you’re considering applying for an RDSP, here are a few things to consider:
- You’ll need to have a Canadian Social Insurance Number (SIN). Don’t have one? Here’s how to apply.
- You must be eligible for the Disability Tax Credit, which helps people with disabilities or their families reduce the amount of income tax they may have to pay. You’ll need to qualify in order to open an RDSP. Learn more about the Disability Tax Credit.
- You need to file your tax return every year. Even if you don’t earn an income, by filing your taxes you’re letting the government know how much in RDSP grants and bonds you qualify for.
- Your bank is here to help. Most financial institutions offer RDSPs and plan holders can generally hold a variety of investments in the plan. An advisor can also help you determine if and how a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) may complement the RDSP, maximizing your retirement savings.
“An RRSP could make sense for someone who wants take advantage of tax efficiencies today while saving for their retirement, and for some, a TFSA may be a smart savings vehicle as well,” explains Imbrogno. “The RDSP, meanwhile, offers the opportunity to receive grant money from the government and not pay tax on those funds until a future date when they are withdrawn. Any of these plans can work together or independently, depending on someone’s personal situation.”
Increasing financial knowledge
Financial products and government benefits are only part of the solution when it comes to addressing financial equity, however. Advice and education are also important components to building a secure financial future.
For those with inconsistent incomes, budgeting and saving are essential skills to help bridge gaps between paycheques and achieve financial wellness.
Today, there are programs that make it easier for Canadians to build their financial literacy through online and accessible platforms. McGill Personal Finance Essentials, for example, is a free online course that helps individuals gain knowledge and confidence to make a lifetime of smart financial decisions. And RDSP advisors at RBC are happy to provide advice and insights in how best to manage this plan in conjunction with the grants and credits available from the government in order to save most efficiently for the future.
National AccessAbility Week (NAAW) is an opportunity to celebrate the valuable contributions of Canadians with disabilities and to recognize the efforts of individuals, communities and workplaces that are actively working to remove barriers to accessibility and inclusion. By becoming informed about financial services, plans and programs available for people with disabilities, Canadian families, individuals and financial institutions can work together to help build long-term financial security, and make tangible progress toward achieving financial equality.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.