By Randy Cass

Special to the Financial Independence Hub

If you’re like many Canadians, your financial life story may go something like this: over the past 20 years you’ve been busy taking care of multiple financial commitments. You may have gotten married, bought your first home and have made some good headway to paying it off, you may have even had a child or two and gone back to school to further develop your career.

Now in your 40s, you’ve achieved quite a bit and are probably starting to seriously think about how you will fund your retirement, children’s education, a bigger house or something else specific to you. Throughout all this, you’ve managed to put away around $100,000.

Congratulations! But, this is most likely not enough for you to be considered a good prospect for most financial advisors. You’re either left to do it yourself [DIY] or your hard earned money is probably going to be put into an expensive option, typically in a mutual fund paying up to 2.5% in fees each and every year.

Though, you may not know just how much you’re paying and may even believe that you don’t pay anything at all because fees are not currently reported on investment statements. What’s more, these fees will likely destroy up to 50% of your potential gains in wealth — yes, small fees have devastating effects over time — leaving you with much more work ahead of you and a harder time reaching your goals. If this is not a slap in the face, I don’t know what is. The good news is that there are new options available for individuals just like you.

Financial services industry in flux

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By Marie Engen, Boomer & Echo

Special to the Financial Independence Hub

Canadian seniors have two national income support payments – Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). These are not pension plans as such because they are non-contributory and financed out of general revenues. Employment history is not a factor in determining eligibility. You can receive OAS pension and benefits even if you have never worked, or are still working.

Old Age Security

The current Old Age Security pension came into effect in 1952, with a maximum benefit of $40 a month. It replaced a program of benefits that was income or “means” tested.

Everyone who has been a resident of Canada for at least ten years is eligible to collect OAS starting at age sixty-five. Normally, you qualify for the full amount only if you have been a resident for at least forty years after turning 18. Partial payments are calculated according to each complete year of residence in Canada after age 18.

Starting in April 2023, the age of eligibility will increase from 65 to 67 over a six-year period. Full implementation will be in effect by January 2029. This change will affect people born in 1958 or later.

You can defer your payments for up to 60 months after the date you become eligible. The payments will increase 0.6% per month to a maximum of 36%.

OAS payments are indexed to inflation and are adjusted quarterly. For the third quarter of 2015, the maximum monthly payment is $564.87 per month.

OAS was originally intended to be a universal program, providing an income safety net to all Canadian seniors. In 1989, the Conservative government under Brian Mulroney changed the rules by introducing what it called the “social benefits repayment tax” – now better known as the dreaded “clawback.”

If a person’s net income exceeds a certain level – called a threshold – they must repay some, or all, of their OAS benefits at a rate of fifteen cents for every extra dollar received. For the 2015 income year, the clawback applied to anyone whose net income exceeds $72,809 up to a maximum of $117,954.

Tom’s income is $80,000. He is $7,191 over the threshold, so $1,078.65 (7191 X 0.15) must be repaid.

GIS/Allowance

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By Adrian Mastracci, KCM Wealth

Special to the Financial Independence Hub

The changes to focus on pertain to deferring receipt of CPP and OAS pension benefits.

However, those changes may not be well understood.

Today’s maximum CPP payment at age 65 is $1,065 per month. Similarly, maximum OAS payment at age 65 is $570 per month.

The first consideration is to answer this question:
“Are your CPP/OAS benefits more valuable early or later in retirement?”

I suggest most should answer “later.”
Inflation and health costs can seriously affect retirements, say after age 75.

The CPP/OAS pension combination is an important component of retirement plans.
Analyze these items in deciding when to start receiving CPP/OAS pensions:
Present and later sources of retirement income estimates.
Employment status today and in the future.
Accumulated retirement portfolio.
Family longevity and health.
The 2015 OAS repayment threshold is net income of $72,800 per spouse.
Full 2015 OAS repayment is reached at net income of $118,400 per spouse.
There is no benefit in deferring CPP or OAS pension past age 70.
Those age 70 or over should apply for both now.

Here is my summary of deferrals: Continue Reading…