ReportWire

Tag: pension

  • Young Canadians sue CPP Investments over climate risks – MoneySense

    [ad_1]

    The four allege in a lawsuit filed in the Ontario Superior Court of Justice on Monday that the investment manager for the Canada Pension Plan is breaching its duty to invest in their best interest, and subjecting their contributions to undue risk of loss by its approach. “I do not want to be suing my pension manager, but I want to retire on a stable pension into a livable future,” said 20-year-old Aliya Hirji, one of the four plaintiffs, at a news conference in Toronto.

    CPP faces lawsuit on fossil fuel ties

    The lawsuit, filed with the support of Ecojustice and Goldblatt Partners LLP, claims CPP Investments is drastically underestimating the financial implications of climate change, as well as worsening its harms by continuing to invest in the expansion of fossil fuel production.

    Karine Peloffy, a lawyer and sustainable finance lead at Ecojustice, said the lawsuit will be a legal test on how the fund should approach climate risks, given its obligations. “It is the first time in any court anywhere that future beneficiaries will argue that one of the largest investors is breaching its duty of intergenerational equity,” Peloffy said.

    CPP Investments spokesman Michel Leduc said the fund will address the matter through the courts, if necessary, but that it has a rigorous approach to integrating climate risk as one of many material factors it considers. “Our focus remains steadfast on integrating climate-related considerations into our investment activity,” he said.

    CPP drops net-zero target but defends approach

    The lawsuit comes after CPP Investments quietly dropped its 2050 net-zero target for carbon emissions earlier this year, but Leduc said the change in language didn’t change the fund’s focus on climate change. He said climate risks are one of many risk areas the fund has to manage as it invests to maximize long-term investment returns without undue risk.

    Leduc said the fund will push back against efforts that it sees as limiting its ability to meet those obligations. “An action against CPP Investments, and our efforts to maintain the sustainability of the Canada Pension Plan, is an action against the retirement security of 22 million Canadians,” Leduc said.

    Travis Olson, another one of the plaintiffs, said Monday that he doesn’t believe it is meeting those obligations when managing investments the fund will one day rely on to help pay his benefits in retirement.

    “My pension manager’s practices are incompatible with an economically stable, climate-safe future that my generation is relying on,” the 22-year-old Olson said. “I’m looking forward to the day our pension manager stops betting against the world my generation will inherit, and until they do so voluntarily, we’re asking the courts to step in and protect our contributions.”

    Article Continues Below Advertisement


    Get free MoneySense financial tips, news & advice in your inbox.

    Read more news:



    About The Canadian Press


    About The Canadian Press

    The Canadian Press is Canada’s trusted news source and leader in providing real-time stories. We give Canadians an authentic, unbiased source, driven by truth, accuracy and timeliness.

    [ad_2]

    The Canadian Press

    Source link

  • Young Canadians sue CPP Investments over climate risks – MoneySense

    [ad_1]

    The four allege in a lawsuit filed in the Ontario Superior Court of Justice on Monday that the investment manager for the Canada Pension Plan is breaching its duty to invest in their best interest, and subjecting their contributions to undue risk of loss by its approach. “I do not want to be suing my pension manager, but I want to retire on a stable pension into a livable future,” said 20-year-old Aliya Hirji, one of the four plaintiffs, at a news conference in Toronto.

    CPP faces lawsuit on fossil fuel ties

    The lawsuit, filed with the support of Ecojustice and Goldblatt Partners LLP, claims CPP Investments is drastically underestimating the financial implications of climate change, as well as worsening its harms by continuing to invest in the expansion of fossil fuel production.

    Karine Peloffy, a lawyer and sustainable finance lead at Ecojustice, said the lawsuit will be a legal test on how the fund should approach climate risks, given its obligations. “It is the first time in any court anywhere that future beneficiaries will argue that one of the largest investors is breaching its duty of intergenerational equity,” Peloffy said.

    CPP Investments spokesman Michel Leduc said the fund will address the matter through the courts, if necessary, but that it has a rigorous approach to integrating climate risk as one of many material factors it considers. “Our focus remains steadfast on integrating climate-related considerations into our investment activity,” he said.

    CPP drops net-zero target but defends approach

    The lawsuit comes after CPP Investments quietly dropped its 2050 net-zero target for carbon emissions earlier this year, but Leduc said the change in language didn’t change the fund’s focus on climate change. He said climate risks are one of many risk areas the fund has to manage as it invests to maximize long-term investment returns without undue risk.

    Leduc said the fund will push back against efforts that it sees as limiting its ability to meet those obligations. “An action against CPP Investments, and our efforts to maintain the sustainability of the Canada Pension Plan, is an action against the retirement security of 22 million Canadians,” Leduc said.

    Travis Olson, another one of the plaintiffs, said Monday that he doesn’t believe it is meeting those obligations when managing investments the fund will one day rely on to help pay his benefits in retirement.

    “My pension manager’s practices are incompatible with an economically stable, climate-safe future that my generation is relying on,” the 22-year-old Olson said. “I’m looking forward to the day our pension manager stops betting against the world my generation will inherit, and until they do so voluntarily, we’re asking the courts to step in and protect our contributions.”

    Article Continues Below Advertisement


    Get free MoneySense financial tips, news & advice in your inbox.

    Read more news:



    About The Canadian Press


    About The Canadian Press

    The Canadian Press is Canada’s trusted news source and leader in providing real-time stories. We give Canadians an authentic, unbiased source, driven by truth, accuracy and timeliness.

    [ad_2]

    The Canadian Press

    Source link

  • ‘It’s moving at snail’s pace’: Retired federal workers waiting months for pension checks – WTOP News

    [ad_1]

    Federal retirements have surged this year, largely due to policies of the Trump administration and its “Department of Government Efficiency,” tasked with slashing spending.

    Federal retirements have surged significantly this year, largely due to policies of President Donald Trump’s administration and its Department of Government Efficiency, which is tasked with slashing government spending.

    The Office of Personnel Management is working through a backlog of retirement claims, which are taking much longer to process. OPM said the average processing time was 76 days in September, up from 70 days in August and 59 days in July.

    It’s leaving retirees in limbo as they wait for their pension checks to arrive.

    WTOP spoke to one federal worker who retired June 30. They did not want to be identified but said there were multiple hints there would be downsizing and restructuring at their former agency.

    “My role there wasn’t a good fit in the new structure of the organization,” they said. “I took it as an opportunity to move forward in my life and move closer to family.”

    They sold their house and moved to a different state, but nearly four months later, they have not received a single pension check. They’ve contacted OPM numerous times and say it’s been “frustrating” and “difficult.”

    “There’s not enough people to process the influx of all the folks that are saying, ‘I’m done with this. I’m putting in my papers,’” they said. “The only answer that I’m getting is, ‘please be patient with us. Please be patient with us.’ Because, honestly, for the longest time, they couldn’t even confirm that they had my paperwork.”

    The person was counting on that pension when they decided to retire. Now, their family is living on one income and struggling with the rising costs.

    OPM told them to expect an “interim” check in mid-November or early December, but it won’t be the full pension amount. Federal employees who accepted the Deferred Resignation Program got paid until Sept. 30 but now go to the back of the claims line, meaning they likely won’t get their pension checks until February or March.

    “I’m in the pipeline. It’s just the pipeline is flooded,” they said. “It’s moving at snail’s pace.”

    Get breaking news and daily headlines delivered to your email inbox by signing up here.

    © 2025 WTOP. All Rights Reserved. This website is not intended for users located within the European Economic Area.

    [ad_2]

    Linh Bui

    Source link

  • Proposed bill would provide options for families of fallen Montgomery Co. firefighters – WTOP News

    [ad_1]

    The HERO Act, inspired by Lt. Christopher Higgins, aims to expand and expedite survivor benefits for families of career firefighters who die in the line of duty. Proposed by Council members Evan Glass and Sidney Katz, the bill ensures grieving spouses and children receive a 20-year pension equivalent, and eliminates delays in benefit distribution.

    Lisa Higgins, the widow of a Montgomery County, Maryland, firefighter who died in the line of duty in January, had to wait months before she and her two children saw the first of the survivors’ benefits they were entitled to under county law.

    Two council members want to change that, so no grieving family has to face hardship after their loss.

    Inspired by fallen firefighter 46-year-old Lt. Christopher Higgins, Montgomery County Council members Evan Glass and Sidney Katz introduced the HERO Act at Tuesday’s council meeting.

    Higgins, who was posthumously granted the rank of lieutenant, died while fighting a fire in Laurel in January.

    According to Glass’ office, if a career firefighter dies in the line of duty, their spouse would receive a disability benefit equal to at least 70% of the firefighter’s salary. If the firefighter was eligible for retirement at the time of death, that spouse could receive a 100% joint and survivor pension.

    The proposed bill would not take away those options, but would provide a third, Glass said.

    “The HERO Act expands the existing survivor benefits so that spouses and children of firefighters who die in the line of duty can receive the equivalent of a 20-year pension, regardless of how long they served,” Glass said.

    Glass also said the bill would expedite the process, so that families don’t face delays.

    “I would not wish this journey upon anyone, and I just appreciate what everyone’s doing to support my children and myself,” Lisa said during a news conference announcing the legislation.

    Lt. Michael Moore spoke of the loss felt by the department when Christopher Higgins died.

    “The pain of that day didn’t stop at the firehouse doors.”

    Referring to the Higgins family, Moore said, “They lost a husband, a father, a mentor, a son and a brother.”

    Lt. Scott Kitner, the captain of the Burtonsville Fire Station where Higgins worked, said the passage of the HERO Act would ensure surviving spouses aren’t left waiting for benefits, and aren’t burdened with years of paperwork.

    For families who lose a loved one in the line of duty, Montgomery County Fire Chief Corey Smedley said, “Even after the emergency is over, that doesn’t stop the suffering.”

    Council member Katz said he expected the council to act on the bill as quickly as possible.

    Glass agreed, saying, “Once it becomes law, which I anticipate it will, it takes effect immediately.”

    The legislation applies to career firefighters only, but Glass’ office indicated that expanding the law to include police and volunteer firefighters could be considered.

    Get breaking news and daily headlines delivered to your email inbox by signing up here.

    © 2025 WTOP. All Rights Reserved. This website is not intended for users located within the European Economic Area.

    [ad_2]

    Source link

  • Financial planning for the first time? A guide for women on a single income – MoneySense

    Financial planning for the first time? A guide for women on a single income – MoneySense

    [ad_1]

    While some financial advisors recommend the 50-30-20 rule, where 50% of your pay goes to fixed expenses, 30% to discretionary and 20% to savings, putting aside just 10% of your take-home pay for savings is OK, too. “We can be as efficient with that 10% as we can possibly be… meaning we could put your savings in a diversified portfolio where the expected returns are going to be higher and over a longer period of time.”

    Ayana Forward, a financial advisor and founder of Retirement in View in Ottawa, acknowledges how hard it can be for single women—and all women—to create a plan to invest, particularly early in their careers. “You have all kinds of competing priorities,” she says, including possible childcare expenses, a mortgage, car payments and school debts. However, Forward encourages women to begin saving anything they can as soon as possible to build habits and benefit from compound interest, which is when your money’s interest starts earning interest of its own. 

    Here’s how that can look: Let’s say you take $100 a week from your miscellaneous allotment and invest it at an interest rate of 5% and watch it grow. After 30 years, if you had put that $100 in a savings account with no or a low interest rate, you’d only have $156,100—but because you invested it, you’d have $345,914. (Calculate your savings with our compound interest calculator.) 

    Prioritize what you love

    What are your absolute must-haves in life? Your non-negotiables? You don’t have to give those up—you may just have to find an alternative way to make them work while meeting your savings goals. “My client, who is a college instructor, loves to travel, and her trips are usually tax deductible,” says Hughes. But to be able to afford her trips while continuing to save, she picked up a part-time job. “It gave her some extra income since she was determined to meet her goal, which was to own a place of her own,” says Hughes. 

    Whether you pick up a side hustle or not, chances are there will still be a few sacrifices you’ll need to make. It comes down to looking at your budget and deciding what you want to prioritize in the immediate time period, says Cornelissen, and deciding what you can let go of for a while. 

    Or it can relieve you from doing the opposite, over-saving for fear of not having enough money. Knowing how much money is going in and going out of your account is key to making a plan for your money.

    Revisit your employee contract

    If you’re employed full-time, find out if your company offers a pension or an employer-sponsored plan, such as RRSP matching (where an employer contributes the same amount as an employee to a registered retirement savings plan). This will help you determine how much you need to save for retirement. “If you don’t have a pension, you’ll need to save more than someone who has a pension,” says Forward. 

    Also, when planning for your retirement explore government income sources that may be available, like the Canada Pension Plan (CPP) and Old Age Security (OAS). “You can go into your My Service Canada account to get those benefit statements so you know what you’ll be receiving from those programs,” says Forward. (You can log into your My Service Canada account using a unique password or use your bank account log in.)

    [ad_2]

    Renée Reardin

    Source link

  • How to renovate your home on a fixed income – MoneySense

    How to renovate your home on a fixed income – MoneySense

    [ad_1]

    But just because you’re on a tight budget doesn’t mean you’re stuck with your dated décor and dysfunctional layout. There are options, even for those who can’t tap into a steady flow of extra cash. Let’s explore what’s possible.

    Why traditional mortgages and HELOCs may not be the answer

    For many people, the first thought when looking to finance home renovations is a traditional mortgage or a home equity line of credit (HELOC). But for seniors living on a fixed income, this may not be a viable option. Why? Simply put, qualifying for a new mortgage or HELOC typically requires a strong, stable income. When your income is limited to Canada Pension Plan (CPP), Old Age Security (OAC) and Guaranteed Income Supplement (GIS), qualifying for new credit can be tough.

    Now, what about seniors who set up a HELOC before they retired? If that’s you, you might think you’re in the clear. However, it’s essential to weigh the pros and cons of using a HELOC for home renovations. On the plus side, a HELOC allows you to borrow against your home’s equity, and you typically only pay interest on the amount you use. This can make it a flexible option if you’re planning to do renovations in stages. On the flip side, because HELOCs have variable interest rates, your monthly payment could increase over time. And with limited income, even small increases can hit your budget hard.

    You’re 2 minutes away from getting the best rates.

    Answer a few quick questions to get a personalized quote, whether you’re buying, renewing or refinancing.

    Exploring alternative financing options for home renovations

    If traditional mortgages or HELOCs aren’t in the cards, don’t worry—there are other ways to finance those much-needed home upgrades. Here’s a breakdown of some alternatives:

    1. Cashing out investments

    If you’ve built up some savings in stocks, bonds or other investments, cashing out a portion could be an option. This approach allows you to avoid taking on debt entirely, which is a big plus. However, it’s important to consider the long-term impact on your financial security. Selling investments too soon can reduce your future income and potential growth. Also, depending on how your investments are structured, you might face tax consequences. If you have funds in a tax-free savings account (TFSA), you might consider using those to minimize the tax hit. Always consult with a financial advisor before making any big decisions.

    2. Reverse mortgage

    A reverse mortgage allows homeowners aged 55 and up to convert part of their home equity into cash, which can be used to fund renovations. You don’t have to pay back the loan as long as you live in your home, making it a good option when your cash flow is constrained. However, reverse mortgages can be complicated and come with fees. Plus, the loan balance increases over time, which means less equity to pass on to your loved ones or pay for your own long-term care. Still, for seniors who want to stay in their homes as long as possible, this can be a useful tool.

    3. Personal line of credit

    Another option to consider is a personal line of credit, which works like a HELOC but isn’t tied to your home’s equity. You can borrow a certain amount of money, pay it back and borrow again as needed. The main advantage here is flexibility. But like any form of credit, it’s crucial to keep an eye on the interest rate, which can vary depending on your credit score. (Because there’s no collateral, the rate will always be higher than a HELOC’s and your credit limit will likely be lower.) It’s also important to avoid borrowing more than you can afford to repay, as this could lead to financial trouble down the road.

    4. Private mortgage

    If you’re lucky enough to have family or friends who have money to lend, a private mortgage could be another way to finance your renovations. With a private mortgage, someone you trust lends you money and you agree on the repayment terms. This option can be more flexible and personalized than dealing with a bank or lender, but it’s also important to formalize the agreement to avoid misunderstandings or family tension. As with any financial agreement, make sure both parties are clear about the terms and conditions.

    [ad_2]

    Sean Cooper

    Source link

  • How to plan for taxes in retirement in Canada – MoneySense

    How to plan for taxes in retirement in Canada – MoneySense

    [ad_1]

    The impact of your marginal tax rate

    It’s important to clarify, Ken, that if you have a minimum RRIF withdrawal with no tax withheld, that does not mean that income is tax-free. When you report your RRIF and other income sources on your tax return for the year, you may still owe tax.

    Canada has progressive tax rates so that higher levels of income are taxed at higher rates. For example, in Ontario, the first $12,000 or so you earn has no tax. The next roughly $3,000 has 15% tax. And the next $36,000 of income after that has about 20% tax. The type of income you earn may change these rates, as will tax deductions and credits. But if we kept going to higher incomes, there would be incremental increases in tax rates.

    If you have a higher income, your entire income is not taxed at the higher tax rate. Incremental tax rates lead to income being taxed at different rates as you move up through the tax brackets.

    This is why retirees tend to have tax owing. If you have a $10,000 pension, you may have no tax withheld at source. But if you have $60,000 of other income, you might owe 30% tax on that pension income.

    Getting ahead of tax installment requests

    If you owe more than $3,000 of tax in two consecutive years (or $1,800 in tax for two years in Quebec), the Canada Revenue Agency (CRA) (or Revenu Quebec) will start asking you to prepay your tax for the following year. This is called a quarterly income tax installment request.

    Installments—along with OAS clawbacks—tend to be the two cursed tax issues for retirees.

    You can reduce your installments by requesting higher withholding tax on your CPP, OAS, pension or RRSP/RRIF withdrawals, Ken. This optional tax withholding might be preferable if you would rather not owe tax or prefer to limit your installment requirements. If you can get your withholding tax rate estimated accurately, you may be able to better spend money coming into your bank account because it is all yours, and not accruing a tax liability.

    The choice is yours

    Many retirees do not have sufficient tax withheld by default. So, quarterly tax installments are common at that stage of life. But owing tax does not have to be a given if you prefer to increase your optional withholding tax.

    [ad_2]

    Jason Heath, CFP

    Source link

  • What to do with a small pension in Canada – MoneySense

    What to do with a small pension in Canada – MoneySense

    [ad_1]

    Many Canadian employers see DB plans, where retirees receive a guaranteed payout every month (sometimes indexed to inflation), as too expensive. And while the average time spent working for the same employer has actually risen over the last five decades, according to Statistics Canada data, spending a lifetime at one job—and collecting decades of pensionable earnings in the process—is a rarity these days. 

    “My dad worked for a bank for 35 years. That was the only job he ever had,” says Kenneth Doll, a fee-only Certified Financial Planner based in Calgary. “Those days are gone.” 

    Many Canadians must make do on partial pension coverage: either a small pension based on a decade or so of service, a defined (DC) contribution plan—where employers don’t provide backup funding if a plan underperforms—or a group registered retirement savings plan (RRSP), possibly with matching funding from their employer. Some Canadians don’t have a pension at all. “There is a massive decrease over the past 30 years in the number of defined-benefit pensions,” says Adam Chapman, financial planner and founder of YESmoney in London, Ont. 

    These pensions won’t pay all the bills like a traditional defined-benefit plan. So, what can people with insufficient pension coverage do? Ultimately, the answer lies in balancing the small (or not so small) guaranteed income from a pension and pushing the limits of other income streams. 

    How to plan your retirement now

    Every Canadian’s circumstances are different, and financial planners avoid speaking in generalities. But the earlier you start planning for retirement, the better. This applies whether you have nothing except the Canada Pension Plan (CPP) and Old Age Security (OAS), a DB plan indexed to inflation and guaranteed for life, or something in between. 

    First of all, sit down and figure out how much you plan to spend on life in retirement. Joseph Curry, a financial planner and president of Matthews Associates in Peterborough, Ont., says that when clients come to him, he maps out these details—as well as their expected income from CPP and OAS. All other income sources, including any pension income, are thrown in there, too. 

    “We have clients who would spend as little as, you know, $2,000 a month, all-inclusive,” Curry says. “And we have clients who would be spending in excess of $200,000 a year in retirement.” 

    One trick that works well is to max out any RRSP contribution room, then take the tax savings and throw them into a tax-free savings account (TFSA) for future retirement income. This can be tricky for Canadians with existing pensions, because their own and their employer’s pension contributions are deducted from their RRSP contribution room. For robust defined-benefit plans like the Ontario government’s Public Sector Pension Plan, it can remove thousands of dollars worth of contribution room a year. 

    [ad_2]

    Brennan Doherty

    Source link

  • How to consolidate your registered accounts for retirement income in Canada – MoneySense

    How to consolidate your registered accounts for retirement income in Canada – MoneySense

    [ad_1]

    There is a spousal attribution rule with spousal RRSPs that applies if you take withdrawals within three years of your spouse contributing. This may result in the withdrawals being taxed back to the contributor.

    When you combine an RRSP and a spousal RRSP, whether you like it or not, the new account must be a spousal RRSP. As a result, you would typically transfer an RRSP into the existing spousal RRSP. 

    There are no tax differences between an RRSP and a spousal RRSP for withdrawals, other than the aforementioned attribution rules. 

    Even if you separate or divorce, your spousal RRSP cannot be converted to a personal RRSP. 

    As a result, Steve, your wife could combine her RRSP and her spousal RRSP by converting them both to a spousal RRIF. I would be inclined to do this. 

    Combining LIRAs with other registered accounts

    Locked-in RRSPs have different withdrawal and consolidation rules than regular and spousal RRSPs. The locking-in provisions of your wife’s locked-in retirement account (LIRA) are meant to prevent large withdrawals. These funds would have come from a pension plan she previously belonged to. Pension money is treated differently from personal retirement savings, such that locked-in accounts have maximum withdrawals as well as minimum withdrawals. 

    In some provinces, an account holder may be able to unlock their locked-in account if the balance is below a certain threshold. This may apply for your wife, Steve, as you mentioned the account is small. Some provinces also allow a one-time unlocking of a portion of the account when you convert a LIRA to a life income fund (LIF), which is essentially a RRIF equivalent for a LIRA. 

    As a result, Steve, your wife may be able to get some or all of her LIRA account transferred to the same RRIF as her RRSP and spousal RRSP. If not, she will have to settle for having a RRIF and a LIF. 

    [ad_2]

    Jason Heath, CFP

    Source link

  • New to Canada and no pension: How to save for your retirement – MoneySense

    New to Canada and no pension: How to save for your retirement – MoneySense

    [ad_1]

    The difficulties facing newcomers to Canada with respect to retirement planning are particularly acute. Given how Canada’s immigration points system works, economic immigrants are usually in their late 20s or early 30s—and they face unique challenges:

    1. Depleted savings: If you’re a 30-year-old newcomer, chances are you’ve used a large portion—if not all—of your savings to set up your new life in Canada. So, you’re behind in the retirement savings game. If retirement savings were a 100-metre race, lifelong Canadians have a 20- to 30-metre head start over newcomers.
    2. Lower income: If you’re a newcomer to Canada, you’ve probably had to restart your career a few rungs lower on the corporate ladder because of your lack of Canadian work experience. This means you’re not earning as much as others your age who have similar experience. Consequently, your ability to save for retirement is lower.
    3. Lack of knowledge: You need to understand Canada’s financial and tax systems to maximize its retirement planning opportunities, and gathering this knowledge takes time.
    4. Reduced contributions: Joining the Canadian workforce later in life than their Canadian-born peers, immigrants have fewer years to contribute to the Canada Pension Plan (CPP) and build up registered retirement savings plan (RRSP) and tax-free savings account (TFSA) contribution room. For this reason, they rely on less tax-efficient unregistered savings and investment vehicles to sustain their retirements to a greater degree than their neighbours.

    But there’s good news. As Toronto-based financial advisor Jason Pereira points out, “Canada’s retirement system does not discriminate against newcomers. The rules are the same for everybody.” So, with the right knowledge and expertise, you can work towards building a strong retirement plan. 

    How to start retirement planning as an immigrant

    To plan for retirement, you need to know:

    • How much money will you need each month in retirement? The simplest method to estimate your income requirement in retirement is to consider it to be 70% to 80% of your current income. For example, if you earn $75,000 a year today, 70% of that is $52,500—that’s $4,375 per month—in today’s dollars. Alternatively, you could estimate the amount you’d need in retirement using this tool.
    • How much you’ll receive from government pension and aid payments: You need to estimate approximately how much you’ll get from the Canada Pension Plan (CPP) and other government programs: Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). The tool at this link will help you do so. Ayana Forward, an Ottawa-based financial planner, notes that “some home countries for newcomers have social-security agreements with Canada, which can help newcomers reach the eligibility requirements for OAS.”
    • How much you’ll receive from your employer-sponsored retirement plan: Workplaces without a defined benefit pension plan sometimes offer a registered investment account (usually a group RRSP), with contributions made by you and your employer or only your employer. If you have a group RRSP from your employer, what will its estimated future value be at the time of your retirement? You could use a compound interest calculator to find out.
    • How to make up for a shortfall: The CPP, OAS, GIS and your group RRSP likely won’t be enough to fund your retirement. You’ll need to make up for the shortfall through your personal investments or additional sources of income.

    Sample retirement cash flow for a 35-year-old (retirement age 65)

    This table illustrates the types of income you could have in retirement. The amounts used in the table are hypothetical estimates. (To estimate your retirement income, try the various tools linked to above.)

    Amount (today’s value) Amount (inflation adjusted)
    A Amount needed $52,500 $127,400
    B Government pension and aid payouts
    (CPP, OAS, GIS)    		 $22,000 $53,400
    C Employer-sponsored pension plan
    (group RRSP)    		 $8,000 $19,400
    D B + C $30,000 $72,800
    E Shortfall (A – D) $22,500 $54,600
    F Needed value of investments in the year of retirement (E divided by 4%, based on the 4% rule) $562,500 $1,365,000
    G Needed flat/constant monthly investment amount from now to retirement $969

    In the example above, the person faces an annual shortfall of $22,500. In other words, this person needs to generate an additional $22,500 per year to meet their retirement income needs, after accounting for the typical government pension or aid payouts and their employer-sponsored retirement plan. To do this, they’d need to invest about $969 per month, assuming an 8% annual rate of return from now to retirement 30 years later. How could they fill this gap and meet their shortfall? Enter self-directed investments, real estate and small-business income.

    Build your own retirement portfolio

    An obvious and tax-efficient way to cover your retirement income shortfall is to build your own investment portfolio from which to draw income in your retirement years. These investments can be held in registered or non-registered accounts. Registered accounts, such as the TFSA and RRSP, offer useful tax advantages—such as a tax deduction and/or tax-free or tax-sheltered gains, depending on the account—but the amount you can contribute to these accounts is limited. Non-registered accounts have no contribution limits but offer no tax advantages. 

    Newcomers often have lower TFSA and RRSP contribution room compared to their peers because they’ve lived and worked in Canada for a shorter period. “TFSA contribution room starts accruing the year of becoming a resident of Canada,” Forward explains. “RRSP contribution room is based on earned income in the previous year.”

    Your TFSA and RRSP contribution room information is available on your Notice of Assessment from the Canada Revenue Agency, which you’ll receive after you file your tax return. To check your TFSA limit, you can also use a TFSA contribution room calculator.

    [ad_2]

    Aditya Nain

    Source link

  • How to plan for retirement when you have no pension – MoneySense

    How to plan for retirement when you have no pension – MoneySense

    [ad_1]

    Retirement

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

    Here’s how Canada’s Old Age Security pension program works, who’s eligible for OAS, when you can start receiving OAS,…

    [ad_2]

    Michael McCullough

    Source link

  • How to manage as a single parent with no pension – MoneySense

    How to manage as a single parent with no pension – MoneySense

    [ad_1]

    “If someone’s not lucky enough to have a company pension, it’s that much more crucial for them to be building up savings on their own,” says Millie Gormely, a Certified Financial Planner at IG Wealth Management in Thunder Bay, Ont. “But that’s really hard to do when you’re supporting yourself and your kids, because you’re having to stretch that income that much further.”

    As of 2022, there were about 1.84 million single-parent families in Canada, and they face unique financial challenges. For starters, the primary caregiver may be covering more than their share of the responsibility and cost of raising their kids, footing bills for everything from food to clothing and childcare. And, thanks to inflation, we all know the cost of living has gone way up in recent years. Plus, a single parent may also be shouldering the burden of saving for their kids’ education (read about RESP planning), taking on medical expenses and more. And then there’s the fact that single parents tend to have less income to work with in the first place. According to Statistics Canada, lone-parent families with two kids report an average household income that’s only about a third of what dual-earner families of four bring in. (Not half, a third.) 

    All this financial strain can be a serious hurdle to retirement planning, but it doesn’t mean it’s impossible to save for your future. 

    Pinpoint your goals

    The first step is to identify your long-term goals (consulting a financial planner can help with this part). You’ll want to figure out your desired income in retirement and how much saving you’ll need to do to reach your goal. The next step is to take a hard look at your spending habits and your budget to find funds you can set aside for your retirement. 

    You may wish to review past bank and credit card statements to get a clear picture of what you’re spending on essentials (which can include rent, groceries, transportation and daycare). You’ll also want to get a clear picture of your debts like credit card balances, personal lines of credit and mortgage instalments to help you identify your fixed costs. All of this will help you figure out a budget you can live with—and what you have left over for retirement savings.

    If what’s left isn’t much, don’t despair. Even a small monthly savings will help you in the long run, says Gormely. “Contributing something rather than nothing on a regular basis is going to put you so much further ahead than if you just throw up your hands,” she says.

    Assess potential sources of retirement income

    You may have more options than you realize. A registered retirement savings plan (RRSP) is a long-term investing account that is registered with the Canadian federal government and helps you save for retirement on a tax-deferred basis. It allows for plenty of room to help your money grow. For example, your RRSP contribution limit for 2024 is equal to 18% of your 2023 earned income (or $31,560, whichever is lower). You also can tap into unused contribution room from past years.

    A tax-free savings account (TFSA) is another option. Like an RRSP, a TFSA can hold any combination of eligible investment vehicles, including stocks, bonds, cash and more, and the growth will be tax-sheltered. “In general, for someone at a lower income level, they might be better off maxing out their TFSA first, and then looking at their RRSP as a source of retirement income,” says Gormely.

    [ad_2]

    Karen Robock

    Source link

  • 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

    [ad_1]

    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.

    [ad_2]

    Keph Senett

    Source link

  • 40 and no pension: What do you do? – MoneySense

    40 and no pension: What do you do? – MoneySense

    [ad_1]

    It’s not as big a problem as you might think. The key is to try to mimic the pay-yourself-first approach by setting up an automatic contribution to your registered retirement savings plan (RRSP) to coincide with your payday. A good rule of thumb to strive for is 10% of your gross income. Remember, in most cases the employees blessed with a defined-benefit pension are contributing around the same 10% rate (sometimes more) to their pension plan. You need to match those pensioners stride-for-stride.

    How much to save when you’re 40 and have no pension

    Let’s look at an example of pension-less Johnny, a late starter who prioritized buying a home at age 35 and has not saved a dime for retirement by age 40. Now Johnny is keen to get started and wants to contribute 10% of his $90,000-per-year gross income to invest for retirement.

    He does this for 25 years at an annual return of 6% and amasses nearly $500,000 by the time he turns 65.

    Source: getsmarteraboutmoney.ca

    Keep in mind this doesn’t take any future salary growth into account. For instance, if Johnny’s income increased by 3% annually, and his savings rate continued to be 10% of gross income, the dollar amount of his contributions would climb accordingly each year.

    This subtle change boosts Johnny’s RRSP balance to just over $700,000 at age 65.

    How government programs can help those without a pension

    A $700,000 RRSP—combined with expected benefits from the Canada Pension Plan (CPP) and Old Age Security (OAS)—is enough to maintain the same standard of living in retirement that Johnny enjoyed during his working years.

    That’s because when his mortgage is paid off, he’s no longer saving for retirement, and he can expect his tax rate to be much lower in retirement.

    40-year-old Johnny spends $40,000 per year, plus mortgage until the mortgage is fully paid off at age 60. Johnny retires at age 65 and continues spending $40,000 per year (inflation-adjusted) until age 95.

    CPP and OAS will add nearly $25,000 per year to Johnny’s annual income (in today’s dollars), if he takes his benefits at age 65. Both are guaranteed benefits that are paid for life and indexed to inflation. 

    [ad_2]

    Robb Engen, QAFP

    Source link

  • CPP payment dates this year, and more to know about the Canada Pension Plan – MoneySense

    CPP payment dates this year, and more to know about the Canada Pension Plan – MoneySense

    [ad_1]

    About the Canada Pension Plan (CPP)

    The Canada Pension Plan is a retirement pension that offers replacement income once a person retires from working life. The CPP is a social insurance plan, and it’s one “pillar” of the retirement income system for Canadians—the other three are Old Age Security (OAS), the Guaranteed Income Supplement (GIS) and personal savings. The CPP is funded by contributions from workers, employers and self-employed individuals. It’s not paid for by the government, despite what many Canadians may think.

    A federally administered program, the CPP is mandatory, meaning that all Canadian workers and employers must contribute. The plan covers all of Canada except for Quebec, which has the Quebec Pension Plan (QPP) for residents of that province. Below are the remaining 2024 CPP payment dates.

    CPP payment dates for 2024

    • January 29, 2024
    • February 27, 2024
    • March 26, 2024
    • April 26, 2024
    • May 29, 2024
    • June 26, 2024
    • July 29, 2024
    • August 28, 2024
    • September 25, 2024
    • October 29, 2024
    • November 27, 2024
    • December 20, 2024

    Where does the CPP money come from?

    Unlike OAS and the GIS, the CPP is funded by employers and employees, and by self-employed people. These contributions, which show up as deductions on a paycheque, are aggregated and invested. For self-employed people, the CPP owed on your net business income is added to your tax bill. The principal plus any revenue earned goes back into the program.

    In January 2024, CPP contributions were raised as part of a seven-year government initiative, started in 2019, to increase retirement income. Read more about the CPP enhancement to see how much more you will pay as an employee or a freelancer.

    Who manages the CPP’s investment portfolio?

    The pension plan’s investments are managed by CPP Investments, a Crown corporation operating at arm’s length from the government. Every three years, the Office of the Chief Actuary of Canada evaluates the sustainability of the plan; the next review will be in 2025. “The CPP is projected to be financially sustainable for at least the next 75 years,” CPP Investments states on its website.

    Am I eligible for CPP?

    If you’re at least 60 years old and have made at least one contribution to the CPP, you are eligible to receive CPP payments. You may also be eligible if you’ve received CPP credits from a former partner or spouse who paid into the plan. CPP benefits are available to Canadian citizens, permanent residents, legal residents or landed immigrants.

    Should I apply for CPP or QPP?

    If you contributed to both the CPP and/or the QPP in Quebec during your working years, your residency at the time of your application determines which plan you’re eligible for—if you’re a Quebec resident, you apply for your pension from the QPP. Otherwise, you apply to the CPP.

    When you can start receiving your CPP

    You’re eligible to start receiving your pension anytime between the ages of 60 and 70 years old, but the younger you are when you begin receiving CPP, the smaller your monthly payouts will be. Many Canadians choose to begin receiving payouts at age 65.

    [ad_2]

    Keph Senett

    Source link

  • How much money should I have saved by age 40? – MoneySense

    How much money should I have saved by age 40? – MoneySense

    [ad_1]

    All the while, you’ve got a serious case of FOMO every time you check social media—all those friends who are jetting off on lavish vacations, buying new cars and splurging on cottages. How are ordinary Canadians actually doing this? And how can you get ahead and save more?

    What’s the average savings for Canadians in their 30s? How much should they have saved?

    A lot of Canadians are managing to save, despite the above financial challenges and obligations. According to Statistics Canada’s 2019 figures (the most recent available), the average person under age 35 had saved $9,905 towards retirement (RRSPs only) and held $27,425 in non-pension financial assets. For Canadians aged 35 to 44, these numbers are $15,993 and $23,743, respectively.

    The table below shows the average savings for individuals and economic families, which Statistics Canada defines as “a group of two or more persons who live in the same dwelling and are related to each other by blood, marriage, common-law union, adoption or a foster relationship.” In 2019, the average household savings rate was 2.08%.

    Financial assets, non-pension No private pension assets, just RRSPs Private pension assets and RRSPs
    Individual under age 35 $27,425 $9,905 $25,263
    Economic family under age 35 $105,261 $140,662 $60,305
    Individual aged 35–44 $23,743 $15,993 $39,682
    Economic family aged 35–44 $131,017 $138,488 $399,771
    Source: Statistics Canada

    The pandemic had a positive effect on savings; the disposable income of the average Canadian rose by an additional $1,800 in 2020, according to the Bank of Canada. That meant most Canadians were able to save an average of $5,800 that year.

    Despite this pandemic silver lining, most Canadians aren’t saving enough for their age groups. When CIBC polled Canadians in 2019 on how much money they’d need in retirement, on average they guessed they would need $756,000. The actual amount you’ll need depends on many factors—to estimate your own number, check out CIBC’s retirement savings calculator.

    How to prioritize financial goals and obligations in your 30s

    With so much going on in your 30s, it can be very challenging to save when you have so much to pay for. After all, you may be carrying a lot of debt due to student loans, a car loan or a mortgage. In the third quarter of 2023, Canadians aged 26 to 35 owed an average of $17,159, and Canadians aged 36 to 45 owed $26,155, according to a report from Equifax.

    Maybe debt is less of a concern for you, but you’re saving for a big goal—like a down payment on a home—and you’re feeling the strain of a high interest rate and inflation. Perhaps you’d like to start a family, but you’re worried about the costs of raising a child. Or you’ve dabbled a bit in the stock market and want to make a few more investments.

    Whatever your situation, talking to a financial planner about your finances and your priorities can help you map out a customized financial plan that factors in your immediate goals—as well as long-term savings and retirement strategies. This might include focusing on paying off high-interest debt, putting aside money for a home, shopping around for life insurance and ensuring that you save each month.

    [ad_2]

    Anna Sharratt

    Source link

  • How to make the most of your compensation – MoneySense

    How to make the most of your compensation – MoneySense

    [ad_1]

    Employees often receive other considerations such as benefits and health insurance, said Cindy Marques, a certified financial planner and co-founder of MakeCents.

    “That will result in dollars saved,” she said. “And essentially, dollars in your pocket when you think about not having to outlay that money yourself.” 

    People often forget what’s included in their package or don’t keep up with changes to group plans, Marques said.

    Make use of company perks and benefits

    Jillian Climie, a compensation expert and co-founder of Vancouver-based consulting company The Thoughtful Co., said employees should take time to research and read up on what the company has to offer in perks and benefits before seeing a human resources representative. 

    “They’re not the most exciting to read but they have a huge value—doing that pre-work yourself,” Climie said. Especially as employees get promoted, she said it’s important to take stock of benefits as new ones roll in, such as funding for professional development and coaching allowances. 

    Fitness allowances such as gym memberships or coverage for at-home workout gear like yoga mats or even treadmills could be included in benefits. Other underutilized unofficial perks could include at-home ergonomic setups, monthly phone bill payments, paid parking spots and travel expenses, Climie said.

    Marques said even the most common benefits such as vacation and health care go underutilized, with workers “not realizing that there’s actually a fair amount of value that they can extract from their workplace.”

    She said people often don’t fully use their paid time off because they can’t afford to travel. “You can still get paid your full wage to just stay at home and relax and give yourself a break,” she said.

    [ad_2]

    The Canadian Press

    Source link

  • Retirement income is highest in these US cities

    Retirement income is highest in these US cities

    [ad_1]

    (NewsNation) — Retirees in the Washington, D.C., area have the highest retirement income in the nation, according to a new study.

    The analysis by SmartAsset found residents of Arlington, Virginia, had the highest retirement income, with an average of $90,140. Cambridge, Massachusetts ($79,563), and The Woodlands, Texas ($79,539), were second and third on the list.

    Of the 345 large cities analyzed, three of the top eight were in the Washington, D.C., area. Most of that stems from higher pensions, IRAs and other retirement accounts rather than Social Security, the report noted.

    Multiple California cities cracked the top ten, including Berkeley ($78,949), Carlsbad ($74,345) and Thousand Oaks ($73,634). Highlands Ranch, Colorado, and Naperville, Illinois, were also high on the list, with retirement incomes above $75,000.

    The city totals were calculated using U.S. Census data and include all income from retirement accounts such as pension plans, IRAs and 401(k)s as well as Social Security income. “Retirees” refers to people aged 65 or older.

    Retirement plans like 401(k)s and IRAs make up the bulk of most people’s retirement income, and a surging stock market has helped boost those balances recently.

    Last quarter, the number of retirement account millionaires rose to a record 485,000, up 15% from the quarter prior and a 43% increase from a year ago, according to new data from Fidelity.

    Individuals in that group had been in their 401(k) plans for an average of 26 years at an average contribution rate of 17%.

    However, those accounts are not the norm and make up just 2% of the roughly 24 million defined contribution plan accounts at Fidelity, Bloomberg reported.

    Instead, SmartAsset’s city analysis suggests most retirees live on much less than the typical American household.

    Across all large cities, the average retirement income was $52,723, well below the median household income of $74,580. That gap underscores the financial anxiety many are feeling today.

    “You look at your 401(k) and your savings, and to make ends meet, you start taking out $100 here and $50 there. Before you know it, it’s gone,” Shari Evans Buford, a Florida retiree, told NewsNation.

    According to a recent AARP survey, one in five Americans over age 50 have no retirement savings, and nearly two-thirds are worried they won’t have enough money to support themselves.

    A typical person now thinks they will need $1.46 million to retire comfortably, even though savers have only set aside $88,400 on average, a Northwestern Mutual survey found.

    As a general rule of thumb, Fidelity suggests having ten times your preretirement income saved by age 67 in order to maintain your current lifestyle.

    But with inflation eating away at Americans’ budgets, many retirees, upwards of 12%, have “unretired” this year.

    Shinobu Hindert, a financial educator, said other would-be retirees are taking a “soft retirement,” where they cut back on hours but continue working for the benefits.

    “They’re not completely exiting the workforce altogether, but they’re finding a part-time job that may provide extra health coverage,” Hindert said on NewsNation’s “Morning in America.”

    SmartAsset’s report suggests Social Security will be the primary source of income for many. In 14 of the cities studied, residents relied on Social Security for more than half of their retirement income, including those in Brownsville, Texas; South Bend, IN; and Spokane, WA.

    In dollar terms, retirees in Ann Arbor, Michigan, ranked highest for Social Security income at $30,428, followed by Carmel, Indiana ($30,069), and Goodyear, Arizona ($29,157).

    According to federal data, the average Social Security payment for retired workers was $1,915 per month in April. However, the size of that check varies depending on how long someone worked, what they made and when they started collecting.

    This year, an average of almost 68 million people will receive a Social Security benefit each month, and by 2035, the number of Americans aged 65 and older is set to hit 75 million.

    [ad_2]

    Andrew Dorn

    Source link

  • Financial hardship withdrawal exceptions and increasing income in retirement – MoneySense

    Financial hardship withdrawal exceptions and increasing income in retirement – MoneySense

    [ad_1]

    First, remember the money in your locked-in retirement account (LIRA) or LIF is money intended to provide you with a lifetime income. Upon leaving your employer, your pension savings were converted into a LIRA, which again is intended to last you your lifetime.        

    With most LIRAs, you can start making withdrawals at age 55. That’s done by converting a LIRA to a LIF. In some ways, LIRAs and LIFs are similar to registered retirement savings plans (RRSPs) or registered retirement income funds (RRIFs). Except with a LIRA, you can’t withdraw money like you can from an RRSP. And with a LIF, you are limited to a maximum withdrawal amount, whereas with a RRIF, you can withdraw as much money as you like.

    Not all LIRAs and LIFs are the same 

    There are federally and provincially regulated LIRAs and LIFs. And, when it comes to withdrawals, exceptions and unlocking privileges, you need to check if your LIRA and/or LIF is a federal or provincial plan, as they each have their own set of rules. If you’re not sure where your LIRA and/or LIF is registered, call the financial institution holding your account.

    Once you know how your LIRA and/or LIF account is registered, go to that jurisdiction’s website to review its unlocking rules. The best thing to do is to download the unlocking application form and give it a read. Typically, it’s not that difficult to understand.

    CM, for you, go to the B.C. Financial Services Authority website and download the application. On the site, you will see you can withdraw additional monies from your LIF, over the maximum withdrawal limit, if you are facing financial hardship. You mentioned you don’t qualify, but let’s review the financial hardship exceptions, just in case.

    Financial hardship withdrawal exceptions for LIFs in B.C.

    To qualify for financial hardship for a LIF in B.C., you must meet one or more of the following criteria:

    1. Your taxable income is less than $45,667.
    2. You have mortgage arrears
    3. You are facing eviction of a rented home, and you need the funds to secure a new principal residence or first month’s rent.
    4. You have medical costs.

    Other ways to unlock your LIF in B.C.

    In most cases, a person will unlock their LIF in one of the following ways instead of applying for financial hardship.

    1. At any age, a LIRA and/or LIF with an account balance of less than 20% of the year’s maximum pensionable earnings (YMPE), $68,500, can be unlocked. In 2024, the YMPE is $68,500, and works out to $13,700.00;
    2. Once you turn 65, you can unlock your LIRA and LIF, if they contain less than 40% of the YMPE, which is $27,400 for 2024;  
    3. Permanent departure from Canada;
    4. Or, your life expectancy has been shortened.

    No matter which exception you qualify for, you must apply. The financial institution holding your investment account can provide you with the necessary forms.

    [ad_2]

    Allan Norman, MSc, CFP, CIM

    Source link