CPP GUIDE SHEET

There are a variety of programs and services to help you ensure your later years are financially safe and secure.

Knowing how to navigate through the maze, when it comes to applying for these programs, can get a bit tricky.

How do I apply for Canada Pension Plan?

How do I apply for Old Age Security?

Are there supplements?

Can I work part-time?

Are there different ways to file taxes?

Some things to keep in mind about when you retire are that your age effects the amount you will get on your pension: (These are the 2020 figures)

  • If you start before age 65, payments will decrease by 0.6% each month (or by 7.2% per year), up to a maximum reduction of 36% if you start at age 60
  • If you start after age 65, payments will increase by 0.7% each month (or by 8.4% per year), up to a maximum increase of 42% if you start at age 70 (or after).

You may also qualify for a Guaranteed Income Supplement (GIS) if:

  • you are 65 or older
  • you live in Canada
  • you get the Old Age Security (OAS) pension
  • your income is below $18,624 if you are single, widowed, or divorced
  • your income plus the income of your spouse/common-law partner is below: $24,576 if your spouse/common-law partner receives the full OAS pension $44,640 if your spouse/common-law partner does not receive OAS $44,640 if your spouse/common-law partner receives the Allowance

The Supplement is based on income and is available to low-income Old Age Security pensioners. It is not taxable.

There are ALLOWANCES:

Allowances for individuals ages 60 to 64 When you are between 60 and 65 years of age, there are two allowances that you may receive if you have low income and your spouse is (or was) eligible for the GIS. If your spouse receives the OAS Pension and is eligible for the GIS, you may receive the Allowance for People Aged 60 to 64 if you meet certain residency conditions. If your spouse was eligible for the GIS and has died, you may receive an Allowance for the Survivor if you have low income and meet certain other conditions. These allowances are also non-taxable.

WHAT WILL I NEED?

One of the first things to figure out is how much money you’ll need in retirement? Do you have a work pension? RRSP’s? Savings? Other sources of income?

Many financial institutions suggest about 70% of your working salary. This has not been the case for us, it seems to be a very high estimate as at this point in our lives our mortgage is paid off and we have no outstanding debts (credit cards, car loan, etc.) Of course this is relative to your lifestyle and what you want to do in retirement..travel, golf, take courses, sports…

You have many more costs while you’re working than while you’re retired, so IMO your need for cash in retirement is considerably less than the 70% figure suggests. There’s a bunch of expenses you don’t have to incur in retirement. For instance, most retirees no longer have to worry about paying off a house, funding their kids’ education, making RRSP contributions or commuting to work. And they pay substantially less in income tax because they’re earning less.

Can I work part-time?

Although many people aim to stop working in retirement, you may find that you want to continue working, perhaps by turning a hobby into a business, after your retirement date. You may also choose to work so you can have additional funds to support your retirement expenses. Whether you work full-time or part-time, the income you earn from employment, self-employment or a business is fully taxable.

Many people do not know that once you are retired you can continue to claim the Canada Employment Amount of up to $1,222 (2019 amount) assuming you had at least that much employment income. At a 15% non-refundable credit rate, this credit may yield tax savings up to $180. If you have employment or self-employment earnings, you may still need to make CPP / QPP contributions up to age 70 and pay EI premiums. If you are already receiving a CPP / QPP Pension, your contributions may provide a CPP Post Retirement Benefit or QPP Retirement Pension Supplement; however, these benefits may not be available if you are not yet receiving a CPP / QPP Pension and contribute to the CPP / QPP.

What is pension splitting?

You can split up to 50% of any pension income that qualifies for the $2,000 federal pension income credit with your spouse. For each $10,000 of pension income that you split with your spouse, tax savings may be up to about $3,000 annually, depending on your province of residence and the difference between the tax rates of you and your spouse.

If you are at least 65 years of age, you may want to consider converting a portion of your RRSP to a RRIF before age 71 if you don’t already have pension income so that you can benefit from pension splitting.

Since allocating pension income to your spouse merely reduces your net income while simultaneously increasing net income of your spouse, benefits and credits that are income-tested based on the combined net income of you and your spouse, such as the GST / HST credit, will not be affected.

IMPORTANT CONTACT INFORMATION

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