Seniors

Whether you are a retiree or thinking about retiring, there are many government programs you need to understand.  There is the Canada Pension Plan (CPP), the Old Age Security (OAS), and the Guaranteed Income Supplement (GIS).  How do they work?

How do RRSPs and RRIFs get taxed?

Can I split my pension income with my spouse?

How do I qualify for the age credit and the pension credit?

Can I write off medical expenses and travel insurance?

Take a look at CRA's Retirement Brochure.

 

CPP Changes effective January 1, 2012

 

You will not be affected by these changes if you started receiving a CPP retirement benefit before December 31, 2010 and you remain out of the workforce.

 

Old Rules:

Age 60 - 65

You could start drawing but you faced a 0.5% penalty for each month before age 65.

Maximum penalty if commencing at age 60 was a 30%.

You had to stop working for two months in order to qualify.

Once you started drawing CPP, you no longer contributed into the pension plan (from neither employment nor self-employed earnings).

As employers matched your CPP contributions, they no longer contributed after you stopped.

 

Age 65 - 70

You automatically became eligible at age 65 to start drawing CPP.

You no longer contributed to CPP on either employment or self-employed earnings.

You could opt to hold off on receiving your pension and you were rewarded 0.5% for each month you held off until age 70.

Maximum reward for waiting until age 70 was 30.0%.

As you were no longer contributing into the plan, your employer no longer made contributions on your behalf.

 

New Rules:

Age 60 - 65

You could start drawing but you will eventually face a 0.6% penalty for each month before age 65 (the penalty is increasing from 0.5% to 0.6% over the next four years.

Maximum penalty if commencing at age 60 will be 36%.

You do not have to stop working for two months in order to qualify.

Even if you are collecting CPP, you must have it deducted from employment earnings.

As employers match your CPP contributions, they will now have to match your contributions.

You will have to contribute to CPP on your self-employed earnings.

 

Even if you are already collecting CPP benefits, you will have to start getting CPP deducted from pay cheques and pay CPP on self-employed earnings

 

Age 65 - 70

You automatically became eligible at age 65 to start drawing CPP.

You could opt to hold off on receiving your pension and you will eventually be rewarded 0.7% for each month you hold off until age 70 (the reward increases from 0.5% to 0.7% over the next two years).

Maximum reward for waiting until age 70 will be 42.0%.

If you continue working, you will have CPP deducted at source unless you opt out.  To opt out, you must submit form CPT30-11 to the CRA and your employer.

Your employer must continue to match your contributions until you opt out.

You must opt out if you have self-employed earnings and you no longer want to contribute.

For a copy of this form, click here.