RDSP at 60: turning the plan into an income stream

An RDSP spends most of its life accumulating. At 60 it changes job entirely and becomes an income stream, and the switch is governed by dates rather than by choice. Three of those dates fall before the birthday itself, which is why the transition is easier to handle at 57 than at 61.

The good news is that the hardest rule in the plan disappears at the same moment. Once the beneficiary has turned 60, none of the grant and bond in the plan is subject to repayment on a withdrawal, on a closure or on the beneficiary's death. The account that was locked by a reserve for decades becomes an ordinary, if oddly formulaic, source of annual income.

The deadlines that lead up to 60

Three cut offs land before payments begin, and each one closes a door permanently. Grant and bond stop, then contributions stop, then payments must start. Employment and Social Development Canada explains the incentive side on its page about how much you could get in grants and bonds: for 2026, the Canada Disability Savings Grant is paid up to 31 December of the year the beneficiary turns 49, to an annual maximum of 3,500 dollars and a lifetime maximum of 70,000 dollars, while the bond runs to an annual 1,000 dollars and a lifetime 20,000 dollars.

The gap between 49 and 59 is the quiet decade. No new government money arrives, but private contributions are still allowed, and every one of them adds to a pool that can be paid out later without any repayment attached. Our note on contribution limits covers how the lifetime room is measured, including the fact that direct transfers between plans for the same beneficiary do not consume it.

What happens to an RDSP when the beneficiary turns 60?

Recurring payments become mandatory. A lifetime disability assistance payment must begin by the end of that calendar year and, once started, must continue at least annually until the money runs out or the beneficiary dies. In exchange, no grant or bond in the plan remains subject to repayment on a withdrawal, a closure or a death.

Employment and Social Development Canada states both halves of that trade on its page about withdrawing money from your plan. The department is explicit that the holder should contact the financial organisation to start payments, and that if the holder does not, the organisation will contact them to say payments must begin. A holder can also ask for payments to start before the year the beneficiary turns 60, which some households do deliberately to spread the taxable income across more years.

What does not change is the plan's basic architecture. The beneficiary is the only person who can receive payments, the account keeps growing tax sheltered on whatever remains inside it, and the disability tax credit still matters for other reasons, as our page on the impact on other benefits sets out the provincial caveats. What ends is the accumulation phase and the reserve that policed it.

How much has to come out of the plan each year?

Federal rules require payments at least annually once lifetime payments begin, but publish no separate minimum dollar amount. After age 59, the LDAP maximum is set by the lifetime disability assistance payment formula, not a floor. In a PGAP year, a separate combined LDAP and DAP limit can be higher where the plan permits DAPs.

The formula divides the plan value at the start of the year by the greater of 80 and the beneficiary's age at that date, plus three, minus that same age, plus any periodic locked in annuity payments.

The formula is written as A divided by the sum of B plus 3 minus C, then plus D. It rewards patience in one direction and punishes it in another: the divisor shrinks each year, so the permitted payment grows as a share of a plan that is simultaneously being drawn down. The agency sets it out in full on its page about the types of payments made from an RDSP.

The agency's own worked example makes the age point concrete. Paul turns 60 during 2045 and his plan is worth 261,448 dollars at the start of that year. Because C is his age on 1 January, the calculation uses 59, not 60: 261,448 divided by 80 plus 3 minus 59, which is 24, giving a maximum payment of 10,893.67 dollars. Using 60 would have produced a larger figure and an over payment.

What is a primarily government assisted plan year?

A year in which the total grant and bond paid into any of the beneficiary's plans in earlier years exceeds the total private contributions. That status changes the ceiling on payments rather than the floor, and it is tested at the beginning of each year, so a plan can move in and out of it.

In a primarily government-assisted plan year, the combined amount of disability assistance payments and lifetime disability assistance payments cannot exceed the greater of the formula result and 10 percent of the plan's fair market value at the start of the year. Once the beneficiary is over 59, the lifetime payment itself cannot be more than the formula result. The agency covers the interaction on its page about the additional rules for a primarily government assisted plan.

One rule survives from the accumulation years and still binds. A payment is not permitted if, after it is made, the plan's fair market value would fall below the assistance holdback amount. For a beneficiary who has turned 60, that holdback is zero because no grant or bond can have been paid within the previous ten years, so it does not constrain a payment at that age. Our explainer on the 10 year rule covers how the reserve unwinds.

How are payments taxed once they start?

Every payment is a blend. The share made up of private contributions is not taxable. Grant, bond, rollover proceeds and investment income are taxable to the beneficiary in the year of the payment, and the issuer calculates the split using a formula rather than letting the holder choose which dollars leave.

In the agency's example, a payment of 10,893.67 dollars carries a non-taxable share of 8,333.33 dollars, because contributions of 200,000 dollars sit inside a plan worth 261,448 dollars and no earlier payment had been made. The taxable remainder is reported in box 131 of a T4A slip and entered on line 12500 of the return, as set out on the page describing how payments from an RDSP are reported.

Withholding is where the transition surprises people. Issuers withhold tax at source only once the taxable portion of a beneficiary's payments in the year exceeds the sum of the federal basic personal amount and the federal disability amount. The Canada Revenue Agency publishes those thresholds on its tax payable page. The $26,267 combined threshold in the table is the published 2025 figure, not a 2026 threshold.

No withholding is not the same as no tax. A beneficiary whose only income is a modest annual payment may owe nothing, but the taxable share still enters income for the year and can interact with other amounts on the return. Our page on the tax treatment of withdrawals goes through the calculation in more detail.

Do payments affect other benefits?

Some are protected by rule and some are not. The Canada Revenue Agency excludes the taxable portion of a payment when calculating the GST and HST credit, the Canada child benefit, the Canada workers benefit, the social benefit repayment and the refundable medical expense supplement. Programs outside that list follow their own income rules.

That is a precise list rather than a blanket exemption, and it is worth reading it that way. Provincial and territorial income support programs set their own treatment of RDSP payments, and Employment and Social Development Canada directs beneficiaries to check the effect on provincial benefits before withdrawing. A beneficiary approaching 60 who also expects federal retirement income should ask how the taxable share interacts with each program by name rather than assuming it is invisible.

What happens if nobody starts the payments?

The obligation does not lapse. Payments must begin by the end of the calendar year the beneficiary turns 60, and Employment and Social Development Canada states that if the holder does not make contact, the financial organisation will contact the holder to say payments must begin. Waiting achieves nothing useful.

There is also a practical reason to act early rather than in December. The first payment usually needs paperwork, a decision about frequency, and sometimes a sale of assets inside the plan to raise cash. A plan invested entirely in long dated holdings can be forced to liquidate at a poor moment simply because the calendar ran out. Asking the issuer in the spring what it needs, and by when, removes that risk.

If the plan is moving to another institution around the same time, note the extra condition set out in the guidance on RDSP limits, transfers and rollovers. Where the beneficiary reached 59 before the year of a transfer, the issuer of the new plan must agree to pay any disability assistance payments the plan is required to make. Transfers must also be for the full amount, initiated by the holder, with the old plan terminated immediately afterwards.

What happens to the plan after the beneficiary dies?

The plan is closed and the balance goes to the estate. Because the beneficiary had passed 60, no grant or bond repayment applies. Employment and Social Development Canada requires the remaining money to be transferred to the estate by 31 December of the year following the year in which the beneficiary dies.

The tax treatment follows the same split as any other payment. Contributions are returned without tax, while grant, bond, rollover proceeds and investment income are taxable, in the estate rather than in the beneficiary's hands, in the year of the payment. Households sometimes assume the plan simply forms part of a will like a savings account, and the fixed closure deadline is the detail that catches executors.

Employment and Social Development Canada also confirms on its page about transferring or closing a plan that a plan closes when the money runs out, when it becomes non-compliant, when the beneficiary dies, or when the holder requests closure in certain circumstances. For a plan in payout, running out of money is the expected ending rather than a failure, since the formula is designed to spread the balance across the beneficiary's remaining years.

A checklist for the year before 60

Most of the work in this transition is administrative and can be finished in an afternoon, provided it happens before the deadline rather than after. Treat the year the beneficiary turns 59 as the working year and the year they turn 60 as the year the decisions take effect.

Five items cover it. Make the final contribution, since the year the beneficiary turns 59 is the last one permitted at all. Ask the issuer to confirm the assistance holdback amount and the plan value at the start of the year, since both feed the ceiling on payments. Decide the frequency of payments, because monthly and annual schedules produce the same total but very different cash flow. Confirm whether the plan is primarily government assisted, which decides whether the 10 percent ceiling can apply. And check that the beneficiary's tax filings are current, since grant and bond entitlements in the final years depend on returns filed two years earlier.

Reei.ca publishes plan comparisons and calculators for Canadian RDSP holders. The formula result of record is the one your issuer calculates from the plan value at the start of the year, so confirm the number with them before committing to a payment schedule, and ask in writing what each option would pay in the first year.