Modelling Registered Disability Savings Plans (RDSPs)

A Registered Disability Savings Plan (RDSP) combines private contributions with government grants and bonds to help Canadians with disabilities save for the long term. Due to its complexity (including tax considerations, grant and bond eligibility, and withdrawal calculations), Snap Projections does not currently offer a dedicated RDSP account type. However, you can approximate RDSP behaviour using existing account types and a few manual entries.

Before modelling, ask yourself: Who owns the RDSP in your projection?

• Third party (e.g., child’s RDSP)

  Treat ongoing contributions as an annual expense. You won’t model the account balance or withdrawals, since these are generally handled by the RDSP owner outside of your projection.

• Client or spouse

  You’ll want to track contributions, grants/bonds, growth, withdrawals and taxes. So, follow the steps below. As a note, the workarounds below are directional and won't reflect the exact taxation, since RDSPs are quite complex regarding the contributions and their partial taxation on withdrawals.

If the RDSP is for someone outside the projections—contributions made to a child's RDSP, for example—then it is easiest to enter these contributions as an expense:

1. In Scenario Setup -> Expenses, add a recurring expense labelled “RDSP Contributions.”
2. Enter the annual amount contributed by the client or spouse. You can also mark the expense as joint if spouses contribute equally.

Without any added assets, this approach keeps your projections clean and straightforward, only affecting your clients' cash flow.

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A quick—but less precise—workaround to model your client's RDSP would be to enter it as a non-registered account where you could add custom contributions to the plan:

1. In Scenario Setup -> Assets, create a non-registered account called “RDSP (Approx).” Apply your assumed asset mix and rate of return as usual.

2. In Scenario Setup -> Incomes, add the grant and bonds amounts as non-taxable income to offset the cash flow assumed to be going into the non-reg account.

3. On the Planning page, record all contributions and withdrawals manually.

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For a closer approximation of RDSP taxation rules, model the plan using two accounts:

• Non-registered to represent private contributions (taxed on investment growth only)
• RRSP to represent government grants & bonds (growth tax-deferred, fully taxable on withdrawal)

Step-by-step setup

1. In Scenario Setup -> Incomes, create a new taxable income entry called “RDSP Grants & Bonds.”
   1. Amount = annual total of government contributions (grants + bonds).
   2. Mark as “Taxable,” so the contributions to the RDSP offset this income.

2. In Scenario Setup -> Assets, add two new financial assets:
   1. a non-registered account named “RDSP (Contributions Only)”;
   2. a new RRSP named “RDSP (Grants, Bonds & Growth)”;
   3. apply your assumed asset mix and rate of return to both accounts as usual.

3. In Scenario Setup -> Assets, RRSP/RRIF tab, manually increase the RRSP contribution room to accommodate government grants and bonds.

4. On the Planning page, manually enter contributions:
   1. Non-registered account: set deposits equal to planned private RDSP contributions.
   2. RRSP account: set deposits equal to grant + bond income

5. Override the withdrawals starting from age 60 and pick $ amounts that simulate relatively accurate Lifetime Disability Assistance Payments (LDAPs)—use the official formula or tools such as the RDSP Calculator.

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• Contribution Limits: Because you’re modifying the client's RRSP contribution room, you must manually track your client’s real contribution limits to avoid modelling excess contributions.
• Growth Tax Distortion: In the non-registered account in Snap, investment growth for fixed income and cash will be taxed in the year the interest is earned, whereas an RDSP taxes interest on withdrawal. This slightly overstates the income tax in the years before withdrawals and understates it in the years after. Typically minor, but be aware.
• Preventing Automatic Transactions: Contributions and withdrawals must be entered using overrides; they won’t automatically adjust with other changes in the plan. In some years, when no contributions or withdrawals are made, you may need to input a $0 override.
• LDAP Complexity: The government’s LDAP formula depends on age and account balance; for precise modelling, recalculate annually outside of Snap and adjust overrides accordingly.

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• Government RDSP Overview: Employment and Social Development Canada

  https://www.canada.ca/en/employment-social-development/programs/disability/savings.html

• LDAP Payment Rules: Canada Revenue Agency

  https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-disability-savings-plan-rdsp/payments-rules/what-types-payments-made-rdsp.html

• RDSP Contribution/Payment Calculator: RDSP.com

  https://www.rdsp.com/calculator/

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