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Dale Jackson

Personal Finance Columnist, Payback Time


This week’s federal budget gave a break to first-time homebuyers wanting to use their registered retirement savings plans (RRSPs) for a down payment. It’s a response to address housing affordability issues, but many other registered investment accounts have failed to keep up with the times.

Even the move to allow first-time homebuyers to borrow up to $35,000 from their RRSPs suggests Ottawa is living in the past. For at least a decade, the maximum amount was $25,000 with a 15-year payback limit. As home prices skyrocketed, the amount RRSP holders could draw from their RRSPs remained stagnant. Even $35,000 is a drop in the bucket for first-time homebuyers wanting to break into some of Canada’s pricier markets.        

Here are other registered accounts that have not been keeping up with the times:   

- Much like the Home Buyers’ Plan, the Lifelong Learning Plan permits RRSP holders to borrow up to $20,000 from themselves to go back to school provided it is paid back within ten years. That limit remains the same despite the fact that most reputable sources peg the cost of a post-secondary school education at more than $20,000 a year.

- With the escalating cost of education in mind, the government grant portion of the popular registered education savings plan (RESP) remains capped at $500 a year to a lifetime maximum of $7,200 per child. That means while parents need to sock away more to meet future education cost increases, the government’s 20 per cent Canada Education Savings Grant is stuck in the mud.     

- The federal government has also failed to keep up with cost-of-living changes for a popular registered account for parents of children with disabilities. Much like an RESP, the Registered Disability Savings Plan (RDSP) allows qualifying parents to invest on a tax deferred basis and generate federal dollars known as the Canada Disability Savings Grant (CDSG). That grant has a lifetime maximum of $70,000 – not much when you factor in the rising costs of raising a child with disabilities to adulthood.   

To Ottawa’s credit, this week’s budget included a proposal to remove the limitation on the period that an RDSP may remain open after a beneficiary becomes ineligible for the disability tax credit.