MIS-TIMING RECEIPT OF GOVERNMENT PENSION BENEFITS - Mistake #2

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Welcome to the next in our 13 BIGGEST INVESTMENT MISTAKES RETIREES MAKE series!  Mistake #2 is

MIS-TIMING RECEIPT OF GOVERNMENT PENSION BENEFITS 

 

 First of all – let me tell you about Government Pension Benefits such as:

CPP (Canada Pension Plan):  We contribute to this (as do our employers) during our ‘working/employment’ Lifetime.  This income is taxable.   

  • Income is based on total contributions using a formula from CRA (Canada Revenue Agency)  To begin your search – check out: https://www.canada.ca/en/employment-social-development/services/
  • The maximum monthly benefit is $1,176.52
  • Additional benefits may include:
    • Death benefit of $2,500 (taxable)
    • Disability benefit of $1,388.18/monthly max.
    • Survivor’s Benefit (spouse and/or children)
    • Children of a disabled person
    • Children of a deceased person
  • Income can begin as early as age 60 or deferred to age 70 with a reduction if received prior to age 65 or increased if deferred to after 65.  PLEASE NOTE:  We strongly recommend the use of government income sources as early as your personal financial situation allows (providing you are not contributing and after discussion and review with your Financial Advisor).  Waiting until a later age for a ‘higher’ benefit may not be your best option.

OAS (Old Age Security):  All Canadians age 65 and older are eligible.  However, there is a clawback if your individual net income exceeds $79,054.00 annually.  This is a taxable benefit.

 

GIS (Guaranteed Income Supplement): 

  •  Provides additional tax-free income (of up to $916.38/monthly) for low-income individuals and is added to the OAS. 
  • Sources of income to calculate GIS eligibility are the following:  CPP or QPP (Quebec Pension Plan), benefits from a Registered Pension Plan, benefits from a foreign pension plan, RRSP or RRIF income, employment insurance benefits, interest, dividends or capital gains realized from savings, income from rental property and all income from employment or other sources (alimony, employment insurance benefits etc.)

IT IS IMPERATIVE TO SEE THE FULL INCOME PICTURE (SOURCES, TAX RATES ETC.) TO MAKE THE BEST DECISION REGARDING TAXES FOR EACH INDIVIDUAL PERSON.  

Always consult the relevant legislation and/or your tax advisor for the most accurate and up-to-date information.