Canadian Personal Finance Blog

Budget 2019 is finally out, and it has a whole treasure trove of goodies. It is truly an election year budget with promises of the future (if you reelect the current government).

I will allow much smarter folks to comment on other areas, but for Registered Disability Savings Plan there are two nice mentions.

RDSP Exempt from Seizure in Bankruptcies

Doug Hoyes and I talked about this on his podcast, but now it looks to be officially in grained in the system.

“Unlike RRSPs, amounts held in RDSPs are not exempt from seizure by creditors in bankruptcy. To level the playing field, Budget 2019 also proposes to exempt RDSPs from seizure in bankruptcy, with the exception of contributions made in the 12 months before the filing.” 

Budget 2019 Canada

I assume the bankruptcy laws may be changed one day, but this seems quite clear. The past 12 months of payments being not exempt makes sense as well.

RDSP Pay Back if DTC Lost

This has always been a big problem, and with the CRA cancelling DTCs left and right this is a good thing.

“To address concerns that this treatment does not appropriately recognize the financial impact that periods of severe, but episodic, disability can have on individuals, Budget 2019 proposes to eliminate the requirement to close an RDSP when a beneficiary no longer qualifies for the DTC. Doing so will allow grants and bonds otherwise required to be repaid to the Government to remain in the RDSP. To ensure fairness for DTC-eligible beneficiaries, some restrictions on access to these amounts will apply. The estimated cost of this measure is $109 million over five years, beginning in 2019–20, and $33 million per year ongoing. “

Budget 2019

Previously you had a short period of time where you had to pay back all grants and bonds, now you can leave the money there. I assume if you try to take money out you would have to pay back grants and bonds (and pay tax on any growth). There still is a few fine points to clarify here.

RDSP Not Forgotten

Glad to see the RDSP is not forgotten in the budget. Curious to see what the Loyal Opposition has to say about these areas come election time?

The buzz-phrase for investing has always been, “Invest for the long-term”. The RDSP (Registered Disability Savings Plan) is actually designed with that concept in mind. It is a really long-term savings plan, and the penalties set up for early withdrawals enforce this vision.

The way the system is set up, money should go in until the beneficiary reaches age 5759, and then it can act as a source of income for the beneficiary at age 60.

With my latest Statement of Benefits update from the Government, came a very useful example of how early withdrawals work. Given the RDSP is 10 years old, some folks may start thinking about withdrawing money, so they gave an example of how that might work.

I don’t suppose they would mind if I borrowed it to show how early withdrawal penalties work:

Reminder Notice -10-Year Anniversary

From the RDSP statement of benefits I received in 2019, most likely written by the Government of Canada, so blame them if the example seems a little confusing.

As of 2019, some beneficiaries will have had an RDSP for 1O years, and may be starting to think about taking money out of the plan. It is important to remember that the money the government deposited into an RDSP must remain there for at least 1O years after the last government contribution was made to the plan. If money is withdrawn before this time, all or part of the government contribution must be repaid to the government.

Whenever you take money out of the plan, you will be subject to one of the following repayment rules:

1. return $3 of government grant and bond for every $1 that you withdraw from the plan (proportional repayment rule), or
2. return all the government grant and bond you have received in the last 10 years; whichever of these two amounts is less.

Example of Grant and Bond Repayment:

James opened an RDSP in January 2009 and contributed $1,500 that year and for each subsequent year. He also received the maximum grant and bond in 2009 and for each subsequent year. As of January 1, 2019, there are total assets of $65,000 in his plan, which consists of $45,000 in grant and bond, $15,000 in personal contributions and $5,000 in interest/earnings. The assistance holdback amount for his RDSP is $45,000, which is the total amount of grant and bond that the Government has contributed in the past 10 years.

On February 1, 2019, James wants to withdraw $10,000 from his plan. Given the proportional repayment rule, if he withdraws the $10,000 in February 2019, then $30,000 of the grant and bond amount must be repaid to the government. Therefore, if James withdraws $10,000, the grant and bond that would remain in his account after the repayment would be $15,000 ($45,000 – $30,000). This means that the total assets in James’ plan would be reduced to $25,000 (i.e. $65,000 total minus $10,000 withdrawal and less

$30,000 in grant and bond repaid to the government). Below is a graphic representation of what would happen to the overall total assets before and after the $10,000 withdrawal.

As you can see, a $10,000 withdrawal will cost $40,000 in this example.

Don’t Take Out Money Early?

There are exceptions for early withdrawals, that I will outline soon. Once the plan recipient turns 60 withdrawals are controlled as well. As usual none of this is straight forward.

For now view the RDSP as a very long-term savings plan.

If you actually clicked on this title, you should be ashamed. You have a problem, and you need help. Don’t click this kind of crap (or worse the actual title which was 3 Ways To Pull Off This Season’s Coolest Beauty Trend ).

Coolest Financial Trend

You want to know what the coolest financial trend is this season? Pay off debt.

If you are carrying a large debt, and you want a guaranteed investment pay back? Pay off debt.

If you can’t sleep and you are having problems with anxiety due to how much money you owe? Pay off debt.

The best way for me to create a list of a whole bunch of articles about one of my cornerstones? Pay off debt.

If you simply follow these simple tips, you can be part of the financial trend setters this season.

What a Load of Tripe

No kidding? I read so many magazines that have less content than this post talking about fashion, beauty tips and yes even some financial advice columns, who buys into this bilge? Yes I have read articles that talked about the coolest financial trend, I threw up in my mouth a little.

You know what you need to do, you don’t need click-bait titled clap-trap to tell you what to do, just go do it.

Today is Ash Wednesday and that means in the Christian world that Lent Begins. For many folks this is a time of reflection, and a time of sacrifice. I don’t really buy into that, I view this more as a time of reflection and growth.

This Lent try to add things to your 40 day journey to help you grow as a person. Some great financial ideas might be:

• Read. Read financial books, read philosophical books or just read something. Reading expands your mind.
• De-Clutter: I really like this idea. Many Churches are jumping onto the Marie Kondo de-cluttering bandwagon. Try to get rid of 40 bags of things that you can donate to charity. Don’t use it as an excuse to buy other crap though.
• Get out of Debt. If you want to celebrate at Easter, start getting rid of debt now.

Did you realize that the 40 days of Lent means you can take every Sunday off? Do the arithmetic, from today until Good Friday, that is more than 40 days.

Recent Articles

I haven’t written one of these in a while, so I do have a bit of a backlog on things I have written. Stock Picks for the end of the year, was me simply checking what my picks did over the year. I think it is not too bad, given the whacky year 2018 was.

Tangible Financial New Years Resolutions was pointing out the importance of doing measurable resolutions for the New Year. Yes, it has been a while, since I wrote one of these. CPP and EI for 2019 gives us the rundown on how much we’ll have to pay for CPP and EI this year. Remember to be careful telling folks when you have finished paying CPP.

Are we Exposed on Banks in Canada? Currently most Indexes do seem to include a lot of financial stocks. How important is your Credit Score? More important than your blood pressure levels? No! How about When to Use a Pay Day Loan Service? Never! See a trend?

Pay Taxes or Your RRSP ? Too late to decide now, but still an interesting question. I grow weary from the The Anti-Virus Shell Game, sometimes cheap, most times too damn expensive.

RDSP Statement of Grant Entitlement 2019 is our yearly report on what we can put in my son’s RDSP.

Money Deep Thought

The Daily Stoic an email list I subscribe to had some very good advice about debt.

Be wary of debt. Because it is not simply a financial matter. It can be a spiritual matter as well. For to owe can mean to be owned. It can mean that you’ve given up the little bit of control you have in the world and handed it over to a capricious or an insensitive person—or just somebody who values their money more than they value you.

— The Daily Stoic