Do you take the grants when they are a child, or do you wait until the grants are larger? Note this is really for parents of disabled children or loved ones under the age of 18.
I have been asked this question a couple of times. What we did was deposit the max that would be matched for my son every year. As I have mentioned in the RDSP Grant entitlement articles every year, it is only $1000 that is matched. This is the actual documentation from the government.
Why Not Wait?
Given the paltry amount put in, why not wait? I guessed that $18,000 deposited, plus $18,000 in grants and then the growth is a good start. We were fortunate that the market from 2008 to now has been insane. The growth aspect of the RDSP has been nothing short of wonderful. In our case, I think it has worked out for the better.
In Early or Later
An overly simplified model would be the following comparison. For both let’s use a conservative growth of 3% per year. Remember the maximum grants for an RDSP is $70,000.
There are bonds available for lower-income folks, and the grants at younger ages can be higher for lower-income families, too. This model can be very different for every family. I will stick with this simplified model.
Scenario 1 Start Early
- Assume the family has an RDSP set up for the first 18 years of the child’s life.
- The parents make enough that the only grants available are $1000, matching a $1000 deposit.
- After the child turns 18, their grants rise to $3000 with a matching $3000 deposit. The grants can be up to $3500 a year (currently).
Scenario 2 Start Later
Assume the RDSP is set up at age 17, and starts when the child turns 18. That is when deposits start, and we will use the same $3000 deposit and $3000 grant model.
If we use those numbers and set up a simple spreadsheet, we see the following:
| Assumed Growth | 3% | |||
| Max Grant | $ 70,000.00 | |||
| Age | Start Early | Total Grant | Start Later | Total Grant |
| 1 | $ 1,000.00 | $ 1,000.00 | ||
| 2 | $ 2,030.00 | $ 2,000.00 | ||
| 3 | $ 3,090.90 | $ 3,000.00 | ||
| 4 | $ 4,183.63 | $ 4,000.00 | ||
| 5 | $ 5,309.14 | $ 5,000.00 | ||
| 6 | $ 6,468.41 | $ 6,000.00 | ||
| 7 | $ 7,662.46 | $ 7,000.00 | ||
| 8 | $ 8,892.34 | $ 8,000.00 | ||
| 9 | $ 10,159.11 | $ 9,000.00 | ||
| 10 | $ 11,463.88 | $ 10,000.00 | ||
| 11 | $ 12,807.80 | $ 11,000.00 | ||
| 12 | $ 14,192.03 | $ 12,000.00 | ||
| 13 | $ 15,617.79 | $ 13,000.00 | ||
| 14 | $ 17,086.32 | $ 14,000.00 | ||
| 15 | $ 18,598.91 | $ 15,000.00 | ||
| 16 | $ 20,156.88 | $ 16,000.00 | ||
| 17 | $ 21,761.59 | $ 17,000.00 | ||
| 18 | $ 23,414.44 | $ 18,000.00 | ||
| 19 | $ 27,116.87 | $ 21,000.00 | $ 3,000.00 | $ 3,000.00 |
| 20 | $ 30,930.37 | $ 24,000.00 | $ 6,090.00 | $ 6,000.00 |
| 21 | $ 34,858.29 | $ 27,000.00 | $ 9,272.70 | $ 9,000.00 |
| 22 | $ 38,904.03 | $ 30,000.00 | $ 12,550.88 | $ 12,000.00 |
| 23 | $ 43,071.16 | $ 33,000.00 | $ 15,927.41 | $ 15,000.00 |
| 24 | $ 47,363.29 | $ 36,000.00 | $ 19,405.23 | $ 18,000.00 |
| 25 | $ 51,784.19 | $ 39,000.00 | $ 22,987.39 | $ 21,000.00 |
| 26 | $ 56,337.71 | $ 42,000.00 | $ 26,677.01 | $ 24,000.00 |
| 27 | $ 61,027.85 | $ 45,000.00 | $ 30,477.32 | $ 27,000.00 |
| 28 | $ 65,858.68 | $ 48,000.00 | $ 34,391.64 | $ 30,000.00 |
| 29 | $ 70,834.44 | $ 51,000.00 | $ 38,423.39 | $ 33,000.00 |
| 30 | $ 75,959.47 | $ 54,000.00 | $ 42,576.09 | $ 36,000.00 |
| 31 | $ 81,238.26 | $ 57,000.00 | $ 46,853.37 | $ 39,000.00 |
| 32 | $ 86,675.41 | $ 60,000.00 | $ 51,258.97 | $ 42,000.00 |
| 33 | $ 92,275.67 | $ 63,000.00 | $ 55,796.74 | $ 45,000.00 |
| 34 | $ 98,043.94 | $ 66,000.00 | $ 60,470.64 | $ 48,000.00 |
| 35 | $ 103,985.26 | $ 69,000.00 | $ 65,284.76 | $ 51,000.00 |
| 36 | $ 70,243.31 | $ 54,000.00 | ||
| 37 | $ 75,350.61 | $ 57,000.00 | ||
| 38 | $ 80,611.12 | $ 60,000.00 | ||
| 39 | $ 86,029.46 | $ 63,000.00 | ||
| 40 | $ 91,610.34 | $ 66,000.00 | ||
| 41 | $ 97,358.65 | $ 69,000.00 | ||
| 42 | ||||
| 43 | ||||
| 44 |
Elementary Analysis
Some conclusions can be made.
- The early start means the beneficiary will hit maximum grants much sooner. The model is flawed because deposits would continue after reaching maximum grants. The maximum contribution limit for an RDSP is $200,000.
- A comparison shows only about $6000 overall difference once Maximum grant level is reached.
There are plenty of flaws in my model. In the end, I think the reasonable answer to the question, “Should we contribute early to the RDSP” is, “it depends”. I realize I use that answer a lot so let me elaborate a little.
- If you can afford to put money in early on, do it.
- Putting $200K in at the start might minimize your grants, but it would maximize your growth period. I doubt many folks do this.
- For lower income families bonds will be paid into the RDSP. The Bonds can be up to $1000 annually and a maximum of $20,000 over the beneficiary’s life. This may trigger an “Early Deposit” scenario.
- This is a very long term savings plan, so withdrawals are discouraged with high penalties.
There are many folks that write about this topic, and lots of documentation from the Government about the RDSP program.
Related RDSP Pages
- The RDSP Page is the Overview of all articles I have written about the RDSP (including DTC and other areas).
- RDSP : Laying the Ground Work (first things first)
What needs to be done BEFORE you can apply for a Registered Disability Savings Plan? A major aspect of this is the Disability Tax Credit (DTC). Make sure you click on this page to get started. - RDSP : Working with The Account
Now that you have succeeded in getting your Disability Tax Credit (DTC) you need to open an RDSP account with a bank, but how is that done? It is not as easy as you might think. This page outlines many issues that have arisen for my family working with an RDSP account. - Disability Tax Credit Related Topics
Thanks to my RDSP and DTC work I then had to learn a great deal about the tax implications of having a disabled child. - Autism Specific Articles
Being the proud Father of a child on the Autism Spectrum, I also ended up writing a great deal about Autism specific things as well.
- RDSP : Laying the Ground Work (first things first)
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