Money 123: Make the Most of Your Money

Special to Global News – By Erica Alini

Make the Most of Your Money

First, there was the Canada Emergency Response Benefit, which millions of Canadians are well acquainted with by now. This week the government started taking applications for the Canada Emergency Wage Subsidy, which will cover 75 per cent of employee wages for eligible businesses for up to 12 weeks.

The CERB and the CEWS overlap to a degree — and that is by design…

Should you change the way you invest?

You’ve heard the trope that financial markets are like a roller coaster. But between late February and March 23, the stock market took investors on the ride of their lives: a plunge of around 35 per cent of its value. Even those who remember well the 2008-2009 financial crisis will tell you this stock-market dive was shockingly steep.

It was a gut-wrenching moment — one that has prompted many to rethink their investment strategy. According to a recent poll conducted by Ipsos for Global News, some 14 per cent of Canadians are changing their approach to investing amid the novel coronavirus pandemic.

But is it a good idea?…

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– THE QUESTION –

“Could you explain what the benefits are of a registered disability savings plan (RDSP)? We have a son diagnosed with autism and have a registered education savings plan (RESP) in place.”

— A Money123 reader 

“The RDSP is a savings plan meant to financially support a disabled person. Anyone can contribute to an RDSP with written permission of the plan holder who typically is the parent or guardian of the disabled beneficiary.

Contributions to an RDSP can be made until the disabled beneficiary turns 59. There is no limit on how much can be contributed in a year, but there is a lifetime cap of $200,000.

Contributions aren’t tax-deductible for the contributors, but investment growth is tax-deferred.

An RDSP may be eligible for two types of government grants: the Canada Disability Savings Grant and Canada Disability Savings Bond for low-income families, both are subject to income test.

RDSP withdrawals can be made to the beneficiary at any time and for any purpose. But the beneficiary must start receiving Lifetime Disability Assistance Payments by age 60, which will continue for the life of the beneficiary.

For the disabled beneficiary, withdrawals could include a blend of non-taxable amounts (capital contribution) and taxable amounts (grants, investment income and growth).

To qualify for an RDSP, your child must be eligible for Disability Tax Credit (DTC). Get your child’s doctor or psychologist to complete form T2201 and submit it to the CRA for approval.

If your child does not qualify for DTC, then stick with the RESP. Similar to the RDSP, the RESP is eligible for the Canada Education Savings Grant (with no income test) and Canada Learning Bond (subject to income test), and some provinces may have provincial grants available.

RESP withdrawals are taxed similarly to RDSP withdrawals.

From an RESP, Educational Assistance Payments (grants, income and growth) can be paid to a student if the student is enrolled in a qualifying educational program. RDSP payments do not require enrolment in a qualifying educational program.“

– Ngoc Day, certified financial planner, Macdonald, Shymko & Company

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