How to Navigate Disability Income and Benefits

Over the past year, I received a lot of questions about disability income and how to best make use of the programs that currently exists. So, I reached out to my friend Tim Comerford, who is a Registered Rehabilitation Professional and has a passion for helping people with disabilities navigate the financial waters.

Below is his guest blog about this topic, but I would also like to announce that Tim has agreed to do a FREE webinar targeted to people with disability income. That webinar is scheduled for November 9th 2021, at 11am and you can register here.

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According to the 2017 Canadian Survey on Disability, more than 6 million Canadians aged 15 and over (22% of the population) identify as having a disability.

Did you know that only 59% of Canadians with disabilities are employed, compared to 80% of Canadians without disabilities? The survey also showed that people with disabilities earn approximately 12% – 51% less than Canadians without disabilities.

Whether a disability is congenital or acquired, the financial impact can be felt for years. Improved financial literacy and awareness of products and services for people living with disabilities can help.

Your Income

Whether your income is from employment, long-term disability benefits (LTD), workers compensation, or Canada Pension Plan Disability (CPP-D), your income is a foundation of your finances. Be sure to check your paystubs or income statements to ensure you know your monthly income. If your income varies due to inconsistent work hours, check over the past 6 months to come up with an average.

LTD income is part of many workplace benefit programs or may be part of a private insurance plan you purchased. If this is your source of income because you are away from work to a disability, how much do you know about the program? Here are some questions to ask your insurance provider or look for in your policy documents:

Does the benefit last 2 years, 5 years, or until you turn 65?

Are you insured for your own occupation or any occupation?

Are there any cost-of-living increases?

Will you be required to apply for other sources of income, such as CPP-D as a condition of your insurance program?

Having this information about your income will help you determine your spending, saving, and future planning.

If you are receiving CPP-D benefits, did you know at the age of 65 your income transitions to regular CPP benefits? CPP will pay you less each month than you receive from CPP-D. While you can then apply for Old Age Security (OAS), the income difference may be greater than the amount of OAS. Planning ahead can reduce the stress of this change in your finances.

Lower Taxes

Did you know that people with disabilities (or their family members) may qualify to pay less tax? The Disability Tax Credit (DTC) is a non-refundable tax credit that may reduce the amount of tax you have to pay. The DTC may be available to the parent of a child with a disability or the spouse of a person with a disability.

You can qualify for the DTC if you already access other federal or provincial disability benefits. In addition, if you have disability-related expenses incurred going to work or school, you may qualify for the disability supports deduction. Visit the Canada Revenue Agency (CRA) website for more information about these tax programs.

A Savings Boost

If you are eligible for the Disability Tax Credit (DTC) and are under the age of 60, you can consider opening a Registered Disability Savings Plan (RDSP). The RDSP is a savings tool that people with disabilities can use for long-term savings. You can contribute as much as you want, up to a lifetime maximum of $200,000. The earnings grow tax-free until taken out of the plan. You can open an RDSP for yourself or a child. Anyone can contribute to the plan, for example, a grandparent can contribute to their grandchild’s RDSP.

The Government of Canada may add funds to your RDSP in the form of the Canada Disability Savings Grant (CDSG) or the Canada Disability Savings Bond (CDSB). You can apply for the CDSG if you are under the age of 49. The amount depends on your income and your RDSP contributions but can be up to $3500 per year. The Canada Disability Savings Bond is designed for low-income families. The Government of Canada will contribute up to $1000 per year into an RDSP even if no personal contribution is paid. The CDSB amount depends on income level.

For more information about the Registered Disability Savings Plan and the Grant and Bond programs, consult the Employment and Social Development Canada website. To open an RDSP and apply for the Grant or Bond, consult a trusted financial advisor, bank, or credit union.

Conclusion

Living with a disability can have a profound impact on your finances. Being aware of your income and taking advantage of programs to lower your tax burden and boost your savings can help you achieve your financial goals.