New savings tool for people with disabilities
By Aaron Broverman • Bankrate.com
Even though Matt Pregent lives in a beautiful Vancouver condo, works part-time as a teller with the Royal Bank and recently married the love of his life, he is trapped in a cycle of financial dependence on the government, which means saving for the future is impossible. "It's frustrating because no matter how much you try to get ahead, the more the government gets back at you," he says.
Pregent and his wife receive a $1,300 disability pension from the British Columbia government that's meant to cover their monthly living expenses outside of homecare and medication costs. The pension is meant to address the employment challenges people with disabilities face such as accessibility issues and outright discrimination. But instead of helping people prosper, it keeps them down.
In order to qualify for a disability income benefit
in B.C., a couple's total income or assets can't exceed $5,000.
And if you make more than $500 a month, the government deducts that
amount from your benefit dollar for dollar. Although the ceilings
and deduction limits differ from province to province, they amount
to the same vicious cycle.
Not only do the limits affect how much you can earn, but they also affect how much you can save for the future. "The more money you make, the more they take," says Pregent.
But that should change on Dec. 1, when the federal
government's Registered Disability Savings Plan, or RDSP, comes
into force, giving people like Pregent and their families an opportunity
to put money away for the future without sacrificing their disability
benefits.
Cashing in
The RDSP is a tax-deferred investment account that operates much like a Registered Education Savings Plan, or RESP. Along with contributions from family, friends, charities or foundations, the government will match the first $500 invested at a ratio of three-to-one for account holders with an annual income of less than $74,357 and two-to-one for the next $1,000 for a maximum of $3,500 annually until your 60th birthday.
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