Retired Money: The Joy of Pension Splitting

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Elderly couple in a meeting with an adviser discussing a document as she watches across the desk in her officeThe third instalment of my new bimonthly Retired Money column at MoneySense.ca has just been published online and focuses on the important topic of pension splitting, or pension income splitting.

You can read the whole piece by clicking on this highlighted headline: How to keep more benefits with pension income splitting.

As the piece observes, pension splitting can be manna from heaven for retired or even semi-retired couples where one is collecting a generous Defined Benefit or other employer pension and the other is not.

Nor is it as complicated a process as it may seem at first blush: you don’t have to actually divide such a pension and send some to each spouse: it all happens at tax-time when for tax purposes you choose what percentage of the pension each spouse should receive. Naturally there are multiple things to consider, such as other income sources, relative tax brackets and so on.

But the bottom line is that in many cases, it should result in thousands of extra after-tax dollars a year in the pockets of the couple as a unit. And that’s how couples should behave, isn’t it?

For more information about pension income splitting, a good place to start is the Canada Revenue Agency’s web site, and in particular this explanation. Note too that it includes a short video.

 

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