To maximize the government contributions, increase potential of financial gain from any investments made, and to be able to withdraw money at a younger age, you should open your RDSP as soon as you’ve become DTC eligible.
Know if and when your DTC eligibility will expire. You can do so by calling CRA, or by checking online on the CRA’s My Account, if you have one set up. To avoid any RDSP complications, make sure to re-apply for the DTC before it expires. You can re-apply up to one year before it expires.
To receive the matching grant (CDSG), you need to make personal contributions. You will receive a Statement of Entitlement each year from the government that details how much you need to contribute that year to maximize the grant. This will also take into account the carry forward amounts that you can receive from previous years that you didn’t receive the grant, but were DTC eligible.
Once you’ve reached that point, the funds in the RDSP belong to the beneficiary, and there will be no penalties for withdrawals (i.e., the 10 year/proportional repayment rule). When you withdraw prior to 60 years of age or before 10 years prior to maximizing your grants and bonds, not only do you face repayments of grants and bonds, you also limit the RDSP’s growth potential to be maximized.
The government calculates the grants and bonds on your family income based on your income tax returns from 2 years prior. This means that if you want to receive the grants and bonds annually, you must file your taxes every year.
Starting at age 19, the government will use the beneficiary’s income instead of the household income (parent(s), legal guardian(s)) to calculate the grant and bond amounts. If they want to receive the grant and bond the first year they are assessed as an adult, they will need to have filed their taxes starting from when they were 17.
When withdrawals are made from the RDSP, tax may have to be paid. In this case, the RDSP issuer will send a tax form to the beneficiary. If the RDSP holder and the beneficiary are not the same person, the holder may not receive the tax form. If the beneficiary cannot manage their personal income taxes, it would be beneficial for the holder to receive the tax form to avoid any issues in filing their taxes.