A TOUCH OF FROST #12 – RDSP’s and Underutilization, Strong 3-year run for equities, & Winter Olympics

RDSP’s and Underutilization

This product can be a difference maker in your life or someone close to you. An RDSP is a Registered Disability Savings Plan created by the federal government in 2008. In fact, Canada is the only country with a savings plan like this, we are truly lucky to have this account, but the implementation has been a bit rocky. First, let’s talk about what it is and how it works.

An RDSP is a savings plan intended to help individuals who are approved to receive the Disability Tax Credit (DTC) to assist in their long-term financial security. The comparison to a RRSP is fair, as they both are registered savings plans, however unlike a RRSP, the contributions are not tax deductible and can only be made until the end of the year in which the beneficiary of the account turns 59. Contributions that are withdrawn are not included as income to the beneficiary when paid out of the RDSP but they, along with the investment income and government assistance, grow on a tax deferred basis until the funds are withdrawn. The real magic of the account is the Canada Disability Savings Grant and the Canada Disability Savings Bond. Government grants and bonds can be paid into the RDSP up until the end of the year the beneficiary turns 49. The amount of grant and bond received depends on the beneficiary's adjusted family net income and the contributions made, but the grants can match contributions for up to 300%. There are maximums for these grants and bonds:

To be able to be a beneficiary of this account, an individual must meet all of the following criteria:

1. Be approved for the Disability Tax Credit (DTC).
• To be eligible for the DTC, a medical practitioner must certify that the individual has a:

  - Severe and prolonged impairment that significantly restricts a basic activity of daily living or requires life-sustaining therapy.

  - Continuous period of at least 12 months where the impairment is expected to last.

  - Marked restriction, meaning the individual is unable to perform a basic activity, or it takes them significantly longer than usual, all or almost all of the time.

2. Have a valid Social Insurance Number (SIN).
3. Be a resident of Canada when the plan is opened.
4. Be under the age of 60 (a plan must be opened before the end of the year the beneficiary turns 59).

However, less than one-third of eligible residents in Canada (up to age 59) have a Registered Disability Savings Plan (RDSP), about 31.5% in 2020¹. This leaves millions of beneficial funding provided by the government unused. There is a major flaw and it’s the fact that people with the DTC don’t even know about it. In 2022, almost half of eligible residents in Canada who had not opened an RDSP had never heard of the savings plan. Almost one-third said that they were not very knowledgeable about RDSPs, 20% said that they were somewhat knowledgeable, and 5% said that they were very knowledgeable¹. Hearing this sucks. As a professional in this space, The Frost Group we are really trying to get the word out there are much as possible for this beneficial account.

I have wondered if the name carries a confusing connotation. People may think the account isn’t for them because their definition of disability is different than what the account actually intends. I recently read an article on LinkedIn by Aaron Hector called Words Matter: A Thought Experiment on Renaming Canadian Investment Accounts. He made two suggestions for re-naming this account, but I really enjoyed ASIP, or Accessibility Support Investment Plan. Here is what he said about it:

“Why it works: Shifts the language from "Disability" (deficit) to "Accessibility Support" (enablement), which reduces stigma and increases adoption.

Why it fails: Breaking the link to the word "Disability" might make it harder to connect to the eligibility criteria - having access to the Disability Tax Credit (DTC). Actually, I take that back, we should scrap the name for the DTC while we’re at it. I’ve long thought a reframe away from the word “disability” into something more positive would increase adoption rates for those who need help but do not want to be labeled as ‘disabled’ - so they don’t apply even though they may qualify.”

This is something where I feel like I can make a huge difference in lives, so if this sounds like you, or you have any questions about it for someone you love, please call us at 403-580-4377 and visit our website for more details. https://www.raymondjames.ca/frostgroup/how-we-help/rdsp-dtc

¹https://www150.statcan.gc.ca/n1/daily-quotidien/220401/dq220401b-eng.htm

What I’m Seeing and Reading Rebecca Okamoto – TEDx Talk In this TEDx talk, Rebecca Okamoto demonstrates how to craft a powerful, 20-word introduction that focuses on providing value to others rather than listing personal qualifications to help you capture attention and get hired. Raymond James Financial – 2026 Outlook While U.S. economic resilience and corporate earnings growth support a positive year for markets, investors should prepare for more muted equity returns and increased volatility as valuations reach historic highs. Raymond James Ltd – 2026 Outlook Canada anticipates a positive year for markets characterized by marginal GDP growth, though it warns that the upcoming USMCA renegotiations will likely trigger periods of volatility and business anxiety.

Chip-Ins From the Week – Winter Olympics

The Winter Olympics began as an "International Winter Sports Week" in Chamonix, France, in 1924, and was so successful that it was retroactively named the first official Winter Games by the International Olympic Committee two years later. Before this dedicated event, winter sports like figure skating and ice hockey actually made their debuts during the Summer Olympics, with figure skating appearing as early as 1908. For decades, both the Summer and Winter Games were held in the same calendar year. However, in 1994, the schedule was staggered so they would alternate every two years, a change that provided a more balanced global sporting calendar and allowed the Winter Games to develop their own distinct identity.

Norway stands as the most successful nation in the history of the Games, holding the record for the most total medals and the most gold medals won by a significant margin. The rules of these sports are often as fascinating as the athletes themselves; for instance, in curling, the stones are made of a rare granite found only on a specific Scottish island, and in bobsleigh, the temperature of the sled's metal runners is strictly measured to ensure no team has an unfair advantage. As the Games look toward the 2026 edition in Milan and Cortina d'Ampezzo, the program continues to expand with the introduction of "ski mountaineering," a grueling sport that requires athletes to scale mountains on skis before racing back down.

Quote of the Week

“I’m a little bit of an eternal optimist. People always say to me, ‘If you go do this and it fails, what are you going to do?’ I don’t care. I’m going to give it my best shot. That’s what I’m going to do. If it doesn’t work, it doesn’t work. And I’ll try again.”

• Jamie Dimon, CEO of JPMorgan Chase

Enjoy the weekend,

Jonny

Disclaimer:Information in this article is from sources believed to be reliable; however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The views are those of the author, Jonathan Van Dam, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision.  This provides links to other Internet sites for the convenience of users. Raymond James Ltd. is not responsible for the availability or content of these external sites, nor does Raymond James Ltd endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy which Raymond James Ltd adheres to. Raymond James Ltd. is a Member Canadian Investor Protection Fund.