Retirement planning for a Canadian with a disability is different from standard financial planning. A non-disabled individual typically aims to accumulate wealth in an Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account (TFSA), where a disabled individual may have Registered Disability Savings Plan (RDSP). The RRSP holder can contribute to the account until age 71, and then will typically convert the account into an Registered Retirement Income Fund (RRIF) and make mandatory withdrawals starting at age 72. The RDSP holder has until age 49 to trigger matching grants and bonds, until age 59 to make personal contributions into the account, and then must begin mandatory withdrawals via Lifetime Disability Assistance Payments (LDAPs) by age 60.
Benefit programs
| Benefit | Average senior | Disabled senior |
| Income source | CPP, OAS, private pension, RRIF, TFSA, | OAS, GIS & payments from an RDSP. |
| CPP or CPP-Disability | Can take a reduced CPP at 60 or defer until 70. | If on CPP-Disability the benefit automatically converts to a regular CPP pension at age 65. Because the flat rate top up payment is removed, monthly amounts will decrease for most people. |
| Health benefits | Transitions to retirement or seniors drug/dental plans or pay out of pocket. Eligible for Canadian Dental Care Plan (CDCP) depending on income | Transitions from ODSP to the Ontario Drug Benefit (ODB). Must apply to the seniors co-payment program to waive the $100 deductible, and can also apply to the ODSP Extended Health Benefit (EHB) to preserve coverage for medical travel, supplies, and mobility repairs. Dental is covered up by Ontario Seniors Dental Care Program (OSDCP) and/or the Canadian Dental Care Plan (CDCP). |
ODSP asset limits
Under ODSP, a single person is allowed to hold up to $40,000 in assets. When the individual transitions from ODSP to Old Age Security (OAS) and the Guaranteed Income Supplement (GIS), these federal programs do not have asset tests. A senior can have $1,000,000 in a bank account, and it will not disqualify them from OAS or GIS.
Some government retirement programs do have income limits
RRIF withdrawals count as taxable income which results in potential claw backs to federal programs such as OAS and GIS. Conversely, RDSP withdrawals (LDAPs/DAPs) are completely exempt from federal OAS and GIS income tests.
Shortened accumulation window for employment income
Financial planning typically assumes a continuous working career where earnings peak in a person’s 50s. For disabled individuals who are lucky enough to be able to work, degenerative health conditions can result in their earning years being reduced unexpectedly. Instead of waiting for their peak earning years to save, they may have to save earlier in life to maximize retirement accounts before health changes negatively affect their ability to earn employment income. Secondly, for individuals who qualify for the Disability Tax Credit (DTC) and have opened an RDSP, contributing annually to maximize the $70,000 lifetime grant before age 49 can be essential to achieving financial independence and moving into retirement comfortably.
How to prepare investment portfolio for retirement?
- Short terms income needs should not be tied the volatility of the market.
- Plan an appropriate cashflow before retirement.
- Separate short term investments from long term investments (ie – cash wedge) to protect from sequence risk, which is having to pull money out of the market during downswings.
Beyond finance advice – the psychology of retirement
Retirement can be challenging. Seniors are encouraged to stay active, keep learning, and cultivate ties to their community. Studies consistently demonstrate that volunteering or providing services to others increases life satisfaction and overall quality of life for retired individuals.
Retirees can start by identifying what they love to do and what they are good at. The key is to bridge the gap between these two things. For some, this might mean securing a part-time job at a hardware store or volunteering their time working with people in need. For others, it could involve helping friends and family in the neighborhood or picking up a new hobby.