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Tag: high-income seniors

  • OAS payment dates in 2024, and more to know about Old Age Security – MoneySense

    OAS payment dates in 2024, and more to know about Old Age Security – MoneySense

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    For example, for income year 2023, the threshold amount is $86,912. If your income in 2023 was $120,000, then your repayment would be 15% of $33,088 (the difference between $120,000 and $86,912). That comes out to $4,963.20.

    OAS clawbacks are paid off in 12 monthly payments, starting in July of the following tax year (in this case, 2024) and ending the next June (2025, in this example). This July-through-June period is called the “recovery tax period.” Continuing our example: $4,963.20 divided by 12 is $413.60. That’s how much you would repay each month from July 2024 to June 2025. (See the OAS recovery tax thresholds for income years 2022 and 2024.)

    How can I avoid OAS clawbacks?

    With some planning, it may be possible to reduce or avoid OAS clawbacks. One strategy is splitting pension income with a spouse who has a lower marginal tax rate. Another strategy is to base withdrawals from your registered retirement income fund (RRIF) on the younger spouse’s age—your minimum withdrawals may be lower. Keep in mind that different kinds of investment income are taxed differently, too. (Learn more about how passive income is taxed.) Consider speaking to a financial advisor or tax planner about these and other strategies. 

    What is the Guaranteed Income Supplement (GIS)?

    The Guaranteed Income Supplement (GIS) is a part of the OAS program that provides an additional, non-taxable monthly payment to Canadian residents who receive the OAS and whose previous-year income is below a certain threshold. Like OAS, the GIS is indexed to inflation.

    The income threshold changes annually. For example, from July to September in 2024, the threshold is $21,768 for a single person. If your 2023 income was less than that, you may qualify for the GIS. 

    For couples, the maximum income thresholds for combined annual income in 2023 are:

    • $28,752 if your spouse/common-law partner receives the full OAS pension
    • $52,176 if your spouse/common-law partner does not receive OAS
    • $40,272 if your spouse/common-law partner receives the Allowance benefit (a non-taxable payment for Canadians aged 60 to 64 whose partner is eligible for the GIS and your combined income is below the threshold for the Allowance)

    If you don’t receive a letter from the government about the GIS, you can submit an application through a My Service Canada Account or by filling out a paper form and submitting it to Service Canada. You can apply for OAS and the GIS at the same time. Learn more about applying for the GIS.

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    Keph Senett

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  • Single, no pension? Here’s how to plan for retirement in Canada – MoneySense

    Single, no pension? Here’s how to plan for retirement in Canada – MoneySense

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    • Canada Pension Plan (CPP) deferral: CPP deferral is worth considering for any healthy senior in their 60s. If you live well into your 80s, you may collect more pension income than if you start CPP early, even after accounting for the time value of money and the ability to invest the earlier payments or draw down less of your investments. CPP deferral can protect against the risk of living too long, especially for a single retiree, and particularly for women, who tend to live longer than men. CPP can be deferred as late as age 70. The benefit increases by 8.4% per year after age 65, plus an annual inflation adjustment.
    • Old Age Security (OAS) deferral: Like CPP, deferring OAS can be beneficial for seniors who live well into their 80s. One exception is low-income seniors who might qualify for the Guaranteed Income Supplement (GIS) between 65 and 70. Single seniors aged 65 and older, whose income is less than about $22,000, may qualify. OAS can be deferred as late as age 70. The benefit increases by 7.2% per year after age 65, plus an annual inflation adjustment.
    • Annuities: Almost everyone wants a pension, yet almost no one is willing to buy one. You can buy an annuity from a life insurance company using non-registered or registered (ie. RRSP) savings. (What is a non-registered account? How does it work?) Based primarily on your age and resulting life expectancy, an insurer will pay you an immediate or deferred monthly amount for life—even if you live until 110. If interest rates are higher when you buy an annuity, the monthly payment amount may be slightly higher as well. If you don’t have a pension and you want the security of a monthly payment, an annuity can be worth considering. Especially if you’re in good health and are a conservative investor.

    Survivor benefits in Canada

    Most DB pension benefits are payable only to surviving spouses. Some pensions have survivor benefits for children or a guaranteed number of months of payments to an estate.

    A CPP survivor pension can be paid to the spouse or common-law partner of a deceased contributor. Single retirees are somewhat disadvantaged since their children will usually not qualify for a benefit if they die.

    Children’s benefits are only payable if a surviving child is under 18, or if they are attending full-time post-secondary education and are between 18 and 25.

    Advice, accountability and cognitive decline

    One of the challenges everyone faces as they age is making sound financial decisions. Our experience and knowledge may increase as we age but our ability to process complex decisions tends to begin declining before we retire.

    Single seniors don’t have a partner to bounce ideas off, so many may find themselves stressed about retirement and financial planning. And not everyone feels comfortable talking about money with their children and friends, and not everyone has a financial advisor, either. (Use the MoneySense Find a Qualified Advisor Tool to find an advisor near you.)

    Partners, adult children and friends can provide accountability, as well with spending and other financial decisions and keep each other in check.

    A single retiree can certainly be successful, but the challenges they face are different from that of couples.

    For these reasons, being conservative, deferring pensions, considering annuities, seeking financial advice, and proactively planning are all strategies to consider when planning for retirement as a one-person household—especially if you have no pension plan.

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    Jason Heath, CFP

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  • Should seniors cancel their life insurance policies? – MoneySense

    Should seniors cancel their life insurance policies? – MoneySense

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    It’s got to be your decision. To help you decide, I will give a quick review of why purchasing insurance makes sense and the two types of insurance available. You can then relate the reason for purchasing insurance to your current need for insurance. 

    Why do Canadians need life insurance

    Ultimately, Canadians buy life insurance because they want to take care of others should something happen to them. They want to protect their survivor’s lifestyle or maximize the inheritance with insurance when they pass away unexpectedly, or naturally after a long, healthy and happy life.

    There are two financial needs to consider when determining the amount of insurance needed: How much income would be needed, as well as current and future debts. Current debt may be a mortgage, and future debt may be children’s university expenses or future taxes.

    Find the best life insurance coverage for you

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    How much life insurance would you need?

    A simple method in determining the how much insurance you need to replace your income is to divide the income needed by a safe investment return.

    If you need to replace an annual income of $50,000, and you think you can safely earn 5% on the invested insurance proceeds a year, then divide $50,000 by 5%. This gives you a need for $1 million of insurance, or $1 million minus your existing investments. That is earning 5% a year on a $1 million gives $50,000 a year.  

    You could argue that you don’t need the $50,000 annual income replacement for life because, your expenses will be lower as you age, you will have other income such as the Canadian Pension Plan (CPP), Old Age Security (OAS), and so on. That’s all true— but this calculation does not take into consideration inflation. Over time inflation will whittle down the value of that $1 million.

    Does life insurance cover debt?

    Yes, and once you know how much insurance you need to replace income, then just add on the debt.

    Maybe when you purchased the insurance your situation looked a bit like this: A $750,000 mortgage and anticipated post-secondary expenses of $250,000 for children, if any, means upping the insurance from $1 million to $2 million.

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    Allan Norman, MSc, CFP, CIM

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