People with disabilities often live on a tight budget. For those that do, here are some points to help manage your financial health and long-term savings:
- Apply for the Disability Tax Credit. If you qualify, it can reduce the amount of income tax for you or somebody who supports you. Even if you are not earning an income and nobody else can use the credit, securing the Disability Tax Credit can make you eligible for the Registered Disability Savings Plan
- Open a Registered Disability Savings Plan (RDSP). The RDSP is a long-term savings plan, created in 2008 by the federal government. The government matches personal contributions by as much as 300%. Many RDSP account holders who contribute $1,500 a year, receive $3,500 in matching government contributions. One can collect as much as $90,000 in government contributions over a lifetime.
- Set up an automatic contribution to your RDSP account. Even a small monthly contribution transferred electronically from your bank account really adds up over time, especially when you factor in the government contributions.
- Can’t afford to make a contribution to an RDSP account? Open an RDSP account anyhow. If you are not employed or your income is fairly low, the government will contribute as much as $1,000 per year.
- RDSP is for the long-term. You will not be able to touch the money in an RDSP for many years without penalty, but your older self will thank your younger self for setting it up, being patient and disciplined. Think of the RDSP as a retirement fund.
- Provincial disability benefits. If you are unemployed or earn a very small annual income, you may want to consider applying for disability benefits offered by your province or territory. Each province and territory has its own program with its own set of complex rules. To qualify, you must demonstrate you meet the financial eligibility requirements. In addition to income limitations, applicants and recipients are not allowed to have more than a certain amount of assets. In Ontario, the limit is $5,000 in assets for a single person with no dependents. The limit is higher for those with a spouse or dependants. If you have more assets than the limit, do not automatically conclude you can’t qualify or will need to spend down your assets before you are approved. There are exemptions to the asset limits, the RDSP being one of them. All of the provinces and territories except for Nunavut (which is undecided at this point) do not include assets in an RDSP for the purposes of determining eligibility for disability benefits. There are other exempt assets as well. Research the rules, become informed and advocate for yourself.
- Professional advice. Find a financial advisor who understands the RDSP and your provincial disability benefits program. A knowledgeable advisor may be able to help you maximize benefits and help you plan for the future. There are not many advisors who truly understand the RDSP and provincial disability benefits, but they do exist. Find one if you can.