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Posts from the ‘Retirement Planning’ Category

18
Apr

Canada Pension Plan – Should You Take it Early?

The new rules governing CPP were introduced in 2012 and they take full effect in 2016.  The earliest you can take your CPP Pension is age 60, the latest is 70. The standard question regarding CPP remains the same – should I take it early or wait?

While you can elect to start receiving CPP at age 60, the discount rate under the new rules has increased.  Starting in 2016, your CPP income will be reduced by 0.6% each month you receive your benefit prior to age 65.  In other words, electing to take your CPP at age 60 will provide an income of 36% less than if you waited until age 65.

CPP benefits may also be delayed until age 70 so conversely, as of 2016, delaying your CPP benefits after age 65 will result in an increased income of 0.7% for each month of deferral.  At age 70, the retiree would have additional monthly income of 42% over that what he or she would have had at 65 and approximately 120% more than taking the benefit at age 60.  The question now becomes, “how long do you think you will live?” Read more »

18
May

Budget 2015 Highlights

On April 21, 2015, Finance Minister Joe Oliver tabled his first federal budget.  The provisions of the budget will be of particular interest to owners of small and medium sized businesses, seniors and families with children.  As well, those looking to make certain charitable donations will be encouraged by Oliver’s budget.

Below is a brief commentary on each of the key budget proposals.

For Seniors and Savers

Increase in Tax Free Savings Account (TFSA) Limit

  • Effective January 1, 2015 the annual contribution limit has been increased from $5,500 to $10,000;
  • As a consequence, the automatic indexing of the annual contribution limit has been eliminated;
  • On April 24, the CRA announced that even though this provision is not law as yet, they will allow increased deposits to a TFSA effective immediately.

Read more »

12
Feb

TFSA or RRSP?

One of the most common investment questions Canadians ask themselves today is, “Which is better, TFSA or RRSP”?

Here’s the good news – it doesn’t have to be an either or choice.  Why not do both? Below are the features of both plans to help you understand the differences.

 

Tax Free Savings Account (TFSA) 

  • Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income.  There is no maximum age for contribution.
  • Maximum contribution is $5,500 per year starting in 2013 ($5,000 per year for the period of 2009-2012).  The contribution must be made by December 31st.
  • There is carry forward room for each year in which the maximum contribution was not made.
  • The deposit is not tax deductible, but the funds accumulate with no income tax payable on growth.
  • Withdrawals may be made at any time on an income tax-free basis.  Withdrawals create additional deposit room commencing in the year after withdrawal.

Read more »

19
Feb

TFSA or RRSP?

Lately, one question clients are asking me is whether they should contribute to a Tax Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP)?  Personally, I really like the TFSA. however it doesn’t have to be an either or choice.  Why not do both?  If both, in what proportion should you divide your contributions?  In order to make an informed decision, let’s quickly review the main features of each program as discussed in last month’s article.  I will use bullets to illustrate the features as nothing gets people’s attention more than bullets.

TAX FREE SAVINGS ACCOUNT

  •  Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income.  There is no maximum age for contribution.
  • Maximum contribution is $5,000 for each year from 2009 to 2012 and must be made by December 31st of the year of contribution.  For 2013, due to indexing the maximum contribution is $5,500.
  • There is carry forward room for each year in which the maximum contribution was not made.
  • The deposit is not tax deductible, but the funds accumulate with no income tax payable on growth.
  • Withdrawals may be made at any time on an income tax free basis.  Withdrawals create additional deposit room commencing in the year after withdrawal.

Read more »