Government Retirement Programs Presented By: Ben Reale, CFP.

Government Retirement ProgramsPresented By: Ben Reale, CFP

• Established in 1966• In 1999, $22B in contributions were made to the CPP• Mandatory contributions are made by those aged 18

to 65; optional for those aged 65 to 70• Indexed annually in January• ‘Normal’ retirement is age 65• Both employee and employer each contribute 4.95%

on income between $3,500 and $50,100 (YMPE)o $2,306.70 max employee portion contributiono Self employed contributes 9.9% or $4,613.40

Canada Pension Plan (CPP)

CPP benefits

• Aim is to reduce total tax paid but look out for OAS claw-back and other tax credits that may be affected

• Both must be 60 or older• Can split up to the number of years living

together while contributing to CPP• Total benefits paid don’t change and upon death

the full amount reverts back to the originator

CPP sharing

• It is important to obtain a copy of your statement• Ensure all contributions are correct• Apply the proper dropout provisions• Call 1-800-277-9914• Visit www.sdc.gc.ca

o Navigate to Explore our site > Programs and policies > CPP > CPP statement of contributions online

Statement of contributions

• Any years you were on CPP disability• Any years you left or reduced work to care for a

child under the age of 7o You must apply for this provision

• 16% of your lowest earning years (up to 7.5)

Dropout provisions

• Changes to be phased in from 2012 to 2016• If you wait until after age 65 to take CPP, it will

increase by a larger percentage than before• If you take the CPP before age 65 it will decrease

by a larger percentage than before• If you are under 65, receiving CPP and still

working, you and your employer will be required to make contributions

• If you are between 65 and 70 and receiving CPP and still working, making contributions for a higher pension will be optional

CPP has changed

• The dropout provision for low income earning years will increase

• You will be able to begin receiving your CPP without having to stop work

• In the future visit www.servicecanada.gc.ca and search for the CPP calculatoro Currently it is being updated to reflect the new

upcoming Post Retirement Benefits

CPP has changed

Current vs. new rules

Old rules New rules

Collecting CPP aged 60-64

Reduced by 6%/year or 0.5%/month

Reduced by 7.2%/year or 0.6%/month

Collecting CPP aged 66-70

Increased by 6%/year or 0.5%/month

Increased by 8.4%/year or 0.7%/month

Under age 65, collecting CPP and

still working

No contributions required

Contributions mandatory towards

Post Retirement Benefit (PRB)

CPP at age 60/70 30% reduction/30% increase

36% reduction/42% increase

Age 65-70, collecting CPP and

still working

No contributions allowed

Additional contributions to PRB

voluntary

Low earning years dropout provision

15% up to 7 years 16% up to 7.5 years

Starting to collect CPP

Must ‘substantially’ cease work (2 month

minimum)

No interruption needed

• Depends on your life expectancy• Evaluate your retirement income needs and where that

income will come fromo Government programs, employer plans, Tax Free Savings

Accounts, Registered Retirement Savings Programs, other personal assets

o If there is a gap, can and should CPP fill it?• Remember any reduction for taking it early or increase for

taking it later is permanent• The Post Retirement Benefit is interesting, consider taking

CPP early and then continuing contributions while working• If you stop working, start collecting CPP

When should you start?

Scenario #1 – people living in Canada• You are 65 years of age or older• You live in, are a legal resident of, or be a citizen

of Canada when your application is approved• You must have lived in Canada for

at least 10 years after turning 18

OAS eligibility

Scenario #2 – people living outside Canada• You are 65 years of age or older• You were a Canadian citizen or legal resident the

day before you left Canada• You must have lived in Canada for at least 20

years after turning 18

OAS eligibility

• Guaranteed Income Supplement• Designed to assist low income seniors already

receiving OAS• Income tested program

o Net income includes all sources of income except OAS, GIS and allowance

GIS eligibility

• A monthly benefit for low income seniors aged between 60 and 64

• Spouse or common-law partner must be eligible or currently receiving OAS and the GIS

• It must be applied for either online through www.servicecanada.gc.ca or by calling 1-800-277-9914

• Must be reported on your tax return but it is NOT taxable

The Allowance

OAS, GIS & Allowance

benefits

• OAS has a claw-back that reduces your payment based on your net income• Claw-back starts eroding OAS at $69,562 and completely eliminates it at $112,772• About 5% of seniors have some OAS clawed back & less than 2% have it completely taken• For an exact benefits calculation visit www.servicecanada.gc.ca• Home > OAS (under Seniors) > What are the payment rates? (under Financial Information) > Tables of rates

(under Related information)

More benefits information

• Canada does have social security agreements with many other countries

• If you’ve contributed to a social security system in a partner country you may be eligible for benefits in Canada

• For more information visit www.servicecanada.gc.ca and click on HOME > Seniors > International benefits OR call 1-800-454-8731

International benefits

• Estimate your expenses in retirement• Estimate your income in retirement

from all sources• Will you have enough?• STEW!

o Save moreo Take lesso Earn moreo Work longer

Will you have enough?

Questions & AnswersThank

you!

Presented By: Ben Reale, CFP