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RDSP withdrawals: 10-year rule, grants, taxes, and age 60
A single early withdrawal can undo a decade of grant accumulation. Learn the 10-year rule, tax implications, and mandatory payments after age 60 for RDSP withdrawals.
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The Registered Disability Savings Plan is built for saving, not withdrawals. Most beneficiaries spend years depositing and collecting government grants and bonds. The moment money comes out, a default system of penalties, repayment schedules, and tax rules takes over.
The central constraint is the 10-year rule. Each contribution dollar carries a 10-year clock. Withdraw any of that dollar before the clock runs and the government claws back $3 of Canada Disability Savings Grants or Bonds for every $1 pulled. The repayment applies to contributions from the past 10 years, oldest first. A $2,000 withdrawal could trigger $6,000 in grant repayments if the account is less than a decade old.
After the plan has been open for 10 years, contributions from the earliest years age out of the repayment window. That does not mean the entire account becomes free money. Each contribution year is evaluated separately. The oldest dollars exit the repayment zone first, so a withdrawal order matters. A holder who pulls money too early erases years of grant matches.
Taxes add another layer. The withdrawal counts as income for the beneficiary, not the contributor. If the beneficiary has little other income, the first roughly $15,000 of withdrawals in a year sits inside the federal basic personal amount and triggers no tax. Beyond that, the marginal rate applies. For someone receiving provincial disability benefits that are income-tested, even a small withdrawal could reduce monthly payments. Beneficiaries on the Alberta Assured Income for the Severely Handicapped program, for example, lose some support once annual income passes specific thresholds.