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Pension Planning Ideas

  • You can start taking your CPP payments as early as 60 or delaying them until 70. You can also take the CPP payments at 61, 62 or 63 up until you reach 70 years of age. If you commence the CPP payments at age 60, your payments will be reduced by 36%. The 36% reduction will be cut by 7.2% for every year you wait until you reach 65 years of age. For every year you wait, your CPP payments will be increased by 7.2% for each year you wait up to a maximum of 36% incremental once you reach 70 years of age.
  • Old Age Security (“OAS”) benefits are “clawed-back” by $0.15 for every $1.00 of net income above $75,910 net income for 2018. The OAS is fully eliminated at net income of $122,843. You can now have the option to delay receiving OAS, for up five years, when your income may be lower. Also, the amount you receive will be 0.6% higher for each month you defer beyond the regular starting date of age 65, to a maximum of 36%. If you have been receiving OAS for less than six months you can still defer these payments by writing to Service Canada. You will, however, have to repay the amounts already received.
  • You can gain the benefit of RRSP deductions even after the year you turn 71 if you make excess contributions to your RRSP before you wind-up your plan at the end of the year in which you reach 71. For example, if your turned 71 in 2018 and earned income of $147,222, your RRSP contribution room for 2019 will be $26,500. However, your plan will be wound-up at the end of 2018. Making the over-contribution (i.e., Maximum allowed RRSP contribution of $26,500 for 2019) in 2018, will allow you to utilize your 2019 RRSP contribution room that would have been lost otherwise. You should be aware that a penalty will apply to the over-contribution, but the tax savings from the RRSP deduction you will receive will far outweigh that penalty.

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