crawling through the retirement Jungle ~ lets help each other

[MillieH]

Its a confusing new language.. I thought, mistakenly, that when you entered your retirement phase, your pension companies and the government sent out forms, you completed them and they sent you money.

Its an "interesting" process

Some of the things I learned so far:

Don't wait for them to contact you.. contact them..

CPP - Canada Pension Plan

OAS - Old age Security

You will need to apply for these about 6 months before your 65th birthday to ensure it starts on time.. Payments begin at the end of the 1st month after your birthday. You can print the forms from their online site.

You can start your CPP at 60 but you lose 6% for each year you do it prior to reach 65. You will get 30% more monthly if you wait until you are 65. If you don't need the money at 65, you can defer it up to 70 years of age. Your payments will be higher.

My plan is to begin OAS at 65 but defer my CPP to 70 if we are still ok financially at that time. If we need the money, I will take it at 65.

Apparently studies show that women live longer than men so you have to budget accordingly
....................

Pension Plans through work

The laws regarding pension plans have changed. I'm not sure when this happened but a spouse is entitled to at least 60% of your work pension. The only way you get 100% is if your spouse signs off any rights to it.

When we got the information on the pension it gives us a bunch of options ranging from
1. highest payout rate ~ unguaranteed him alone
10 lowest payout rate ~ both of us 10 yrs guaranteed

In this instance
1: unguaranteed means, he would get the max payable as long as he lives but once he croaks it all stops.
10: guaranteed with both of us for 10 yrs means we would get a much lower payment a month for life as long as one of us is alive and it would pay for the 10 years to our estate if we both croaked.

We opted for a middle of the road option .. where we get a reasonable monthly payment but if he croaks before I do.. I'll get 60% of the payment until I croak.. We opted for unguaranteed as at this point its time for us.

We also had the option to transfer the whole pension amount into a locked in RSP account at our bank. The financial advisor reviewed the paperwork and said the bank would charge a 1.5% rate to handle these funds while the pension plan only charged .50%

RRSPS

I was concerned about how and when to remove the money from these to ensure we don't pay more tax than we need to. Apparently, you don't have to remove these at 65, you have until 70, when you can transfer them to a RRIF or take them out. Once you reach 71, you have to take a minimum amount each month.

Some people take money directly from their RRSp , however if you wish to do income splitting, you need to transfer from the RSP into a RRIF so it then becomes income and can be split for the purpose of lowering the tax payable.

A good reason to remove your RRSPs before 71 is if one of you croak, the other would have all of the RRSPs to remove and depending on how much there is, could end up losing a lot in taxes.

TFSA ~ Tax free savings account ~ meaning any money earned in this account is not taxable ~ max contribution is 5,500 a year or if you are just starting , you can max it out.. you can remove $$ from this account at any time but any taken out can't be replaced until the next year



We plan on not renewing his RRSPs when they come due, let them sit in the RRSP account , then transfer to a RRIF

Transferring your funds to a different bank.........

This came up because I'm annoyed with TD because when they merged with Canada Trust, they went crazy with banking fees. I changed to another bank but left some RSps there...

If you want to transfer your RRSPs or RRIF to another bank, most will absorb the transfer fees. Wait until your RRSps have matured to ensure you don't lose any interest and or get charged any extra fees. Banks will usually bill you $150. You take the bill to your new bank and they pay it. (be sure to check with your bank if you plan to do this.. I noticed that RBC does it and Desjardin does it.

Income splitting/sharing..

I'm not quite sure what the correct terminology is but when one reaches 65 and has pension income, you can each declare part of the income and be in a lower tax bracket. A tax loophole given to old fogeys I guess..


In Ontario, once you turn 65, you get prescription drug benefits.. omgosh.. its soo freaking inexpensive.. you pay 100$ a year and $6 a refill.. I noticed that SDM was offering a $2 reduction.. Costco only charges about 3.84 . If you have a benefits package ,you may be able to get all or a % of these charges back. Some benefit packages may reduce payouts. Be sure to check yours.


This is all I can think of right now.. my brain is fried. The information may not be 100% correct. It's my understanding of what I've learned over the past few weeks..

I would love to hear about things you have learned to make this an easier process.

[Ciel]

From the RBC site, about withholding taxes when you take money out of RRSPs:
http://www.rbcroyalbank.com/products...rsp-rules.html

Withholding Taxes

Funds withdrawn from an RRSP will be charged withholding taxes. This amount must be held back by the plan administrator and remitted to the government on your behalf.

Effective January 1, 2005, the following withholding tax rates apply: Amount of RRSP Withdrawal All Provinces Except Quebec Quebec
Up to and including $5,000 10% 21%
$5,000.01 to $15,000 20% 26%
More than $15,000 30% 31%


You will receive a T4 RRSP receipt for any funds withdrawn during the year showing the amount to be included in your taxable income and the credit for the withholding tax.

I have posted this information here for anyone with an RRSP who might be thinking of withdrawing money this year to cover some expenses. Keep in mind the CRA's lowest personal tax bracket is 15%, so if you withdraw under $5000 and bank only takes off 10% for tax-hello, you have a 5% tax liability at income tax time unless your other taxes paid + non-refundable tax credits buffer or reduce or eliminate that leftover tax.

I remember last year the changes to CPP age/pension changes. If you stayed home to raise kids until they were 7, on your pension form there is a section for each offspring to provide their SIN next to their name and to sign off on. Worth pursuing to get any extra money that will come forth to reflect that life situation. My mother got the two of us to do that and back then, she relied on the baby bonus to help with expenses if father was not forthcoming on money for bus trips to doctor's appointments, etc.

Millie H-since you are an existing TD Canada Trust customer, enter the Samsung Galaxy Tab draw. Seems each branch is giving one away to existing customers (separate contest from new customers who open one of two types of accounts). Contest ends July 31.

[Retiree]

I will begin to collect my OAS in February 2015. I did not have to apply for it. I received a letter in January saying that I may be atomatically enrolled. I check in April and found that, indeed, I had been enrolled. At that point, I requested that they deduct $100 a month at source. I have been doing that with my CPP since I began to collect it at 60 and so far have not had to pay any additional income tax and, in fact, have received a nice refund annually, which is so much better than having to pay.

When I began to collect my CPP at 60, I also began to make withdrawls from my RRSP. I did this because with my small CPP being my only income, I was in a very low tax bracket. That strategy seems to have worked well, too, in so far as I have had to submit less to the tax man.

[MillieH]

It seems we get one question answered and I come up with another one.. When investing in RSPs you have until sometime in the new year to buy them for the past year. Does anyone know when you have to take the RRSPs out for the past year.. is it by the end of that year or a few weeks/months into the new year?

[Shwa Girl]

good thread

about RRSPs, some may want to look at tax free savings accounts too

[blueeyetea]

Does anyone know when you have to take the RRSPs out for the past year.. is it by the end of that year or a few weeks/months into the new year?

For withdrawals, it's the fiscal year the money is taken out, so last day is December 31. It's considered income.

[blueeyetea]

You can start your CPP at 60 but you lose 6% for each year you do it prior to reach 65. You will get 30% more monthly if you wait until you are 65. If you don't need the money at 65, you can defer it up to 70 years of age. Your payments will be higher.

My plan is to begin OAS at 65 but defer my CPP to 70 if we are still ok financially at that time. If we need the money, I will take it at 65.

Actually, I've been told to take it anyway at 60, even with the penalty, because you come out ahead. If you wait until taking it at 65, you'll be at least 73 before you break even with if you have taken it at 60. Better to take it at 60 and invest it if you don't need it for living expenses by then.

[redhdlois]

Anyone here savvy on investing in companies that pay dividends ? I am recently retired (single, 55) and have never been involved in the stock market.
I am also wondering whether I should buy another condo or rent. I am just recently renting. I met with a financial advisor at my local credit union (of course he wants me to rent....and invest my money with them).....I initially thought I should just buy a condo and be mortgage free.
I felt my money wouldn't last if I were to rent. However, I could be wrong. If I were to invest in blue chip companies that pay dividends I could possibly cover my expenses that way. I am more confused/stressed now than I was before lol

Anyway, if anyone has experience in investing in dividend stocks I 'd appreciate any input. Thanks in advance

[Retiree]

We have been renting for 3 1/2 years at nearly $1,400 per month. We took the money from the sale of our house and invested $60,000 in GICs (12, with one coming due each month, each one invested for 5 years). The rest we invested in 3 different medium risk mutual funds. We have been supplementing our retirement pensions with $1,000 withdrawls, per month, from these non-registered investments.

To date, although the markets have been up and down, and we have withdrawn $42,000 from our non-registered investments, during this 3 1/2 years our financial investments have increased in value. Of course, our non-registered investments are diversified enough to weather the ups and downs.

For us, renting has been good, without the headache of home maintenance, taxes, utility payments or condo fees associated with condo ownership.

I think that if one is not so good at handling money, it might be better to invest in property. If one lives a modest life style and is disciplined about not spending more than one has coming in, then renting and letting your investments help to support you in retirement is probably okay.

[Cake]

Its a confusing new language.. I thought, mistakenly, that when you entered your retirement phase, your pension companies and the government sent out forms, you completed them and they sent you money.

....................

Pension Plans through work

The laws regarding pension plans have changed. I'm not sure when this happened but a spouse is entitled to at least 60% of your work pension. The only way you get 100% is if your spouse signs off any rights to it.

When we got the information on the pension it gives us a bunch of options ranging from
1. highest payout rate ~ unguaranteed him alone
10 lowest payout rate ~ both of us 10 yrs guaranteed

In this instance
1: unguaranteed means, he would get the max payable as long as he lives but once he croaks it all stops.
10: guaranteed with both of us for 10 yrs means we would get a much lower payment a month for life as long as one of us is alive and it would pay for the 10 years to our estate if we both croaked.

We opted for a middle of the road option .. where we get a reasonable monthly payment but if he croaks before I do.. I'll get 60% of the payment until I croak.. We opted for unguaranteed as at this point its time for us.


.

An option we chose was to get a life insurance policy and I signed off on my husband's plan.

My husband (we) get the largest per month payout now and when he dies I get an insurance policy that is the equivalent to 10 years of his pension (paid in a tax free lump sum). The cost of the life insurance is much, much smaller than the decrease in the monthly income if I had opted to remain on the policy.
It's a numbers thing. If only we could know when we would die...LOL.

[Retiree]

I think that the spousal entitlement, to work pensions, has been on the books for quite some time. Back in the mid to late 90s I was working on my HR certificate and that was discussed in the benefits course.

I wouldn't have thought about the life insurance option but that seems as if it would be worth crunching the numbers to see if you would come out ahead.

[blueeyetea]

Anyone here savvy on investing in companies that pay dividends ? I am recently retired (single, 55) and have never been involved in the stock market.
I am also wondering whether I should buy another condo or rent. I am just recently renting. I met with a financial advisor at my local credit union (of course he wants me to rent....and invest my money with them).....I initially thought I should just buy a condo and be mortgage free.
I felt my money wouldn't last if I were to rent. However, I could be wrong. If I were to invest in blue chip companies that pay dividends I could possibly cover my expenses that way. I am more confused/stressed now than I was before lol

Anyway, if anyone has experience in investing in dividend stocks I 'd appreciate any input. Thanks in advance

This is where I think you should consult a fee based financial advisor. You pay those advisor a fee for an hour or two of advice. (There are different kinds of financial advisors out there - some give advice and sell, so you really need to do your homework.)

Having said that, your question depends on what you want to accomplish with your investment? You can invest in blue chip companies that pay dividends, and provide additional income. With stock prices going up since last year, the rate of returns aren't great.

As far as I'm concerned, condo fees are just like rent - they'll keep going up and they aren't regulated by provincial bodies. So, I'm not sure if you'll be that much ahead.

[blueeyetea]

I think that if one is not so good at handling money, it might be better to invest in property.

I find this a strange comment, when you'll find people not good with their money among owners and renters. Being an owner doesn't make someone better at managing their finances or vice-versa.

[itchy54]

http://canadianmoneyforum.com

lots of VERY knowledgeable folks here. some really good topics, including a good retirement thread.

[Retiree]

Blueeyetea, you are so right. I guess my only point is that if your investment is tied up in property it is less liquid, so provided real estate is going up, your investment is someone protected.

We all know that if we want to see good growth in our investments we need to be in for the long term. If we aren't so good with money there may be more temptation to cash out early, if the investment is more liquid.