Our annual Tax Tips Guide is here to assist you in your tax planning, presenting some quick ideas and strategies for you to employ.
Pensioners, retirees and pre-retirees
- Income splitting opportunity: Individuals receiving pension income that qualifies for the pension credit can allocate up to half of this income to their spouse or common- law partner. A determination of the optimal allocation should be considered in tandem with the couple’s continued ability to qualify for Old Age Security payments and certain personal tax credits.
- An individual’s RRSP must be converted to a Registered Retirement Income Fund (RRIF) or be used to acquire a qualifying annuity by the end of the year in which the individual turns 71.
- An individual who turns 71 in 2019 can make RRSP contributions by the end of 2019, to the extent contribution room is available.
- An individual can continue to contribute to a spousal RRSP until the end of the year in which his or her spouse turns 71, to the extent contribution room is available.
- For 2015 and later years, the Government has introduced a reduction in the minimum amount that must be withdrawn from a RRIF for a holder who is over the age of 71. The new RRIF factors will permit holders to preserve more of their RRIF savings in order to provide income at older ages.
Did you know?
The maximum RRSP contribution limit is $26,500 for 2019,
The amount of earned income required in 2019 to maximize your 2020 RRSP contribution room is $151,277 (the maximum RRSP contribution limit for 2020 is $27,230).
Canada Pension Plan (CPP)
Below are some noteworthy highlights of the CPP:
- The maximum contribution to the base CPP for employers and employees in 2019 is $2,748.90. if you are self-employed, the contribution is $5,497.80.
- 2. The maximum earnings on which the CPP applies is $57,400 for 2019.
- If you are an employee between the ages of 60 and 65 and you are still working, you must continue to contribute to the CPP even if you are already receiving a CPP retirement pension.
- If you are an employee between the ages of 65 and 70 and you are still working, you can choose to continue to contribute to the CPP or you can opt out of making these contributions.
- Any contributions you make to the CPP, regardless of your age, will increase your CPP benefits even if you are already receiving a CPP pension benefit.
- You will be able to receive your CPP retirement pension without any work interruption.
- Your employer must match your CPP contributions in each of the scenarios described in (3) and (4) above. Your employer must make these contributions regardless of whether you are already receiving a CPP pension benefit.
Did you know?
The CPP contribution rates have increased, with the current contribution rate set at 5.15% for the 2019 taxation year. The CPP contribution rate will continue to increase to 5.95% by 2025. This is an effort by the Ontario government to ensure that retirees will have sufficient income past retirement in case they were unable to save during their working years
Old Age Security (OAS)
- The value of the Old Age Security (OAS) benefit for eligible seniors over the age of 65 is approximately $7,362 per year (indexed quarterly for inflation) but is generally reduced where net income exceeds $77,580 and is completely eliminated where income exceeds $123,386.
- Beginning July 1, 2013, you may choose to delay receipt of your OAS for up to five years beyond the normal benefit start date of 65, in exchange for an increased monthly pension of 0.6% (up to a total of 36% annually) for each month that the benefit is delayed.
- If you have already started receiving OAS payments but would like to benefit from the deferral, you can write to Service Canada to request a cancellation of your OAS pension, provided you have been receiving the pension benefits for less than 6 months, but you will have to repay the benefits you have received to date.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.