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RDSP Withdrawal Rules and Strategies

Learn when and how you can withdraw from an RDSP, and how those withdrawals are taxed

The Registered Disability Savings Plan (RDSP) is designed to support long-term financial security, but eventually, the funds need to be accessed. Understanding how withdrawals from an RDSP work, when they can be made, and how they’re taxed is essential for effective planning.

With the right approach, RDSP withdrawals can provide reliable, tax-efficient income to support quality of life without jeopardizing other benefits.

Types of RDSP Withdrawals

There are two main types of RDSP withdrawals:

1. Disability Assistance Payments (DAPs)

  • Lump-sum payments that can be made at any time.

  • Often used for unexpected expenses or specific needs.

  • No mandatory minimum or schedule applies, but rules on taxation and grant repayment may.

2. Lifetime Disability Assistance Payments (LDAPs)

  • Regular, recurring payments (e.g., monthly, quarterly).

  • Must begin by the end of the year the beneficiary turns 60.

  • Once started, LDAPs must continue for life.

LDAPs are structured to provide ongoing financial support in later years, aligning with the RDSP’s long-term focus.

When Can You Start Withdrawing from an RDSP?

  • DAPs can be made at any time, provided the plan has been open for at least 10 years for certain grant and bond protections.

  • LDAPs are required to begin no later than the year the beneficiary turns 60 but can start earlier.

There’s no penalty for early withdrawals, but the timing affects taxation and potential grant/bond repayments.

Tax Treatment of RDSP Withdrawals

Withdrawals from an RDSP are composed of:

  • Contributions (non-taxable): Original personal contributions are withdrawn tax-free.

  • Government grants, bonds, and investment growth (taxable): These components are taxed as income when withdrawn.

The taxable portion is reported on the beneficiary’s tax return, not the plan holder’s. For many beneficiaries, low taxable income means little to no tax is actually paid on withdrawals.

Optimize models these tax impacts to ensure withdrawals are timed efficiently.

Grant and Bond Repayment Rules on Withdrawals

If certain conditions are not met, withdrawing from an RDSP can trigger the repayment of government grants and bonds:

  • Any withdrawal made within 10 years of receiving a grant or bond may require repayment of up to $3 for every $1 withdrawn.

  • This is known as the “10-year assistance holdback”.

Careful planning is required to avoid unnecessary grant and bond repayments. Optimize helps you manage this risk through strategic withdrawal timing.

Impact on Other Benefits

Withdrawals from an RDSP do not affect eligibility for most federal or provincial income-tested benefits, including:

  • Guaranteed Income Supplement (GIS)

  • Canada Workers Benefit (CWB)

  • Provincial disability assistance programs

This protection makes RDSP withdrawals one of the most beneficial and secure forms of supplemental income for individuals with disabilities.

How Optimize Helps You Manage RDSP Withdrawals Effectively

At Optimize, we ensure RDSP withdrawals are planned to support your needs while preserving benefits and minimizing taxes. We help you:

  • Determine the right timing and structure of withdrawals.

  • Calculate the tax impact on the beneficiary, ensuring withdrawals stay efficient.

  • Plan around the 10-year assistance holdback, avoiding unnecessary grant or bond repayments.

  • Coordinate RDSP withdrawals with other income sources, maintaining benefit eligibility.

  • Review and adjust your withdrawal strategy over time, aligning with evolving needs.

With Optimize’s guidance, accessing RDSP funds becomes a smooth, tax-smart process that supports long-term financial well-being.