As RRSP deadline approaches.. March 1, 2011

Posted Thursday, February 17th, 2011. Filed Under Financial Empowerment

AJay Llave has provided yet another informative “blog post”. RRSP’s is the investment vehicle for Canada (registered retirement savings plan – an income deferred plan) as opposed to 401(k) in the US and other saving options for other countries.

Regardless of where you live, you MUST consider your future. While I believe living in the moment you cannot choose to live in a vacuum and/or be irresponsible so that when the time comes to retiring you say, “well I didn’t know that I needed to save”. The reports indicate that Canadians are spending $1.50 to every $1 – this includes mortgage debt, credit card debt, and other debt you may be servicing. The ratio of debt to equity has shifted. The time of people putting away 10% of their earnings is few and far between. Partly because we live in a consumption, throw away society and partly because, I feel, that costs are constantly risisng (gas, oil, insurance, etc). This is not just a Canada issue, this is a global issue.

NOW IS THE TIME TO START SAVING EVEN IF IT IS $1/DAY/WEEK/ or MONTH.

See Jay’s article below:
ONCE YOU HAVE DETERMINED YOUR RETIREMENT OBJECTIVES, YOU NEED TO CONSIDER THE SOURCES OF INCOME TO SUPPORT THOSE OBJECTIVES.

You will probably be receiving benefit from the government as well as from
your personal savings and pensions.

The sources of income are:

Government Benefits

Old Age Security (OAS)

OAS is not a pension in the traditional sense but rather a social benefits program operated by the federal government.

It is directed at Canadians that have reached the age of 65.

Eligibility for OAS depends on how long you have lived in Canada. Generally
speaking, if you have lived in Canada for 40 years, you will receive the
maximum OAS benefit. If you have lived in Canada for between 10 and 40
years, you will be eligible for a partial pension.

The maximum OAS pension as of January 1, 2011 is $524.23 per month and is considered taxable income. This amount is increased quarterly to account for inflation.

The benefit amount you receive is determined by how much income you receive from other sources. If you receive other income over approximately $66,000, the OAS benefit will be reduced.

You should apply for your OAS benefits six months before you turn 65. You cannot apply for OAS online but you can complete the form online and then mail a printed copy. Here is a link to the form you need to fill out: OAS
application

When you apply you will need the following:

. Proof of age – This does not need to be submitted with the application but you must be able to produce this if requested.

. Proof of residency – If you have lived in Canada all your life, there is no documentation required. However, if you were born elsewhere, you will need to provide proof of residency status (a passport will suffice) and proof of residence history (passports, visa).

Guaranteed Income Supplement (GIS)

An addition to the OAS program is the Guaranteed Income Supplement or GIS. As with OAS, this program is income tested and is directed at low income recipients. To be eligible for GIS, an applicant must be eligible to receive OAS benefits and not exceed specified income maximums. Income will include items such as private and government pensions, RRSP payments, employment income and investment income, but will not include OAS benefits.

The amount of the benefit will depend on factors such as marital status,
individual or combined family income, and whether or not a spouse is a
recipient of OAS benefits. For example, for January-March 2011, the maximum benefit for a single person is $661.69 per month and is not considered taxable income. This would be based on income of less than $15,888. GIS must be applied for annually.

Canada Pension Plan (CPP) and Quebec Pension Plan (QPP)

The CPP and QPP are plans based on work experience in Canada. If you have made at least one contribution to the programs you will be eligible for a pension. Currently the maximum CPP pension is approximately $960 per month and is considered taxable income. This is based on someone retiring at age 65. The pension amount is adjusted each year to keep pace with inflation.

The standard CPP benefit is designed to start at age 65 but if you meet
certain conditions, you can choose to start receiving benefits as early as
age 60. In that case your pension will be reduced by 30% since the pension
is reduced by .5% for each month that you choose to take the pension before reaching 65. There are definite benefits to taking your CPP early. Let’s discuss whether this is an appropriate strategy for your personal
circumstances. You can also choose to delay receiving your pension to as
late as age 70 and you will receive 30% more.

If you and your spouse are both eligible to receive a CPP pension, you can
split your pensions. Pension sharing makes good tax sense since you and your spouse could end up reducing the taxes you pay.

You must be at least 59 years old to apply for CPP benefits. You can obtain
a paper application from Service Canada or make your application online. You will be able to submit the application online and then mail in a signature page.

Best regards,

Jay F. Llave

“Create and Protect Wealth”
Insurance and Financial Advisor
Creative Planning Financial Group
(416) 487-5210 ext. 5317
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One Response to “As RRSP deadline approaches.. March 1, 2011”

  1. Lorraine Williams on April 12th, 2011 7:17 am

    Dear Jay, perhaps you can help me. I was born in Canada of Canadian parents but as an RN had the opportunity to work and live in the U.S.and for a few years in Saudi Arabia.I am 68 yrs. old and have been collecting CPP since age 60.I have moved many times due to several factors, one being that as a nurse I could easily find employment.The only documents I have to prove the years that I wasn’t living in Canada is my U.S.statement of earnings for the years that I worked and lived there. I have only had a Canadian passport since 1986 and every 5 years, the old ones are kept by the Passport office. I have had 2 green cards for the U.S.and presently live near my children in Texas.My question is why must I provide further proof of the years that I lived in Canada when they must have my statement of earnings there? If you could provide me with resources, I would be very grateful. I am alone and that extra money would be of immense help to me. Thank you.

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