Tag Archives: CPP

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Brooks Financial 2017 Income Tax Changes

What’s New and Revised for the 2017 Personal Income Tax Return?

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The Government of Canada has announced several changes and improvements to personal income tax benefits and credits. The following should be considered for your 2017 personal income tax return:

  1. Those responsible for raising children under 18 years of age may be eligible for the tax-free monthly Canada Child Benefit (CCB) payment, which has replaced the Canada Child Tax Benefit. The Child Disability Benefit and provincial and territorial programs, may be included in the CCB. The National Child Benefit Supplement and the Universal Child Care Benefit have also been replaced.
  2. To qualify for the Northern Residence Deduction, you have to have been a permanent resident in a qualifying zone for a minimum of six months. The Basic and Additional Residency amounts have now been increased to $11 per day.
  3. As an Eligible Educator, you may qualify for a 15% tax credit for teaching supplies purchased in 2017 school year, to a maximum of $1000.

For more information on what’s new for the 2017 income tax season, contact Brooks Financial to discuss filing your 2017 personal income tax.



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An OAS and CPP Primer, understanding sources of government retirement income

An OAS and CPP Primer

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Understanding Government Sources of Retirement Income in Canada

The majority of Canadians spend their lives drawing income from one main source or employer during employment years. Retirement income, however, requires careful planning since we can no longer depend on one main source for our income.

Old Age Security (OAS) and Canada Pension Plan (CPP) are the two sources of retirement benefits that come from the Government of Canada. Both are significant components of your retirement income plan.

Old Age Security

  • Your monthly OAS benefit payment is based on your individual income (not household income), and you do not pay into it directly
  • You may still collect this benefit even if you’ve never worked or are still working
  • Monthly benefit payments are available to seniors age 65 and up
  • You can apply for OAS as early as 11 months before you want your benefits to commence
  • If you don’t meet the full criteria, you may still be eligible to receive a partial pension
  • You may defer receiving OAS benefits up to 5 years after you become eligible to get a higher monthly amount
  • There are no survivor benefits
  • Eligible seniors are automatically enrolled and do not need to apply for this benefit
  • This benefit is fully taxable
  • Visit https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/payments.html for more information on OAS Payment Amounts

Canada Pension Plan

  • Your monthly CPP benefit payment depends on the level of contributions made by you and your employer during your employment
  • You may choose to receive your full benefit at age 65
  • You may receive your benefit as early as age 60 with a deduction
  • You may postpone your benefit payments until the age of 70 to receive an increase in your monthly payment
  • Upon death, a lump sum is paid to your estate, up to a maximum of $2500
  • You must apply for this benefit, it does not commence automatically
  • This benefit is taxable income
  • Visit https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html for more information on Canada Pension Payment Amounts

Old Age Security and Canada Pension Plan are just two of several possible retirement income sources. Contact Brooks Financial today to get started on creating a retirement income plan that will minimize your tax payments and maximize your income during your retirement.


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Divorce? Not All Assets Are Equal – Tesia Brooks CFP CDFA

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imageNot All Assets are Equal

It is common with separating couples for one spouse to want to keep the family home while the other wants to keep their pension.

I recently worked with a woman going through a divorce after 15 years of marriage.

She had worked part time for the duration of the marriage to enable her to have more time at home with their children. He had continued to grow his career in his corporate position that provided him with a defined benefit pension.

During the separation process, the wife wanted to keep the family home to ensure a stable environment for the children. The husband wanted to keep his pension.

Based on the net property statement (value of all the marital assets minus marital debts including taxes) this scenario saw the wife owing her husband an equalization payment.

When I sat down with her to review the outcome of this scenario she was shocked. She had no idea that she would have to pay him (an equalization payment) as she thought the value of the pension would outweigh the value of the house.

I also showed her what her financial life would look like in the short term and 25 years down the road, based on this scenario.

As it was, the husband would be in a good financial position as his pension assets would continue to grow and provide sufficient cash flow throughout retirement. On the other hand, she would be left with no pension in retirement and would have to sell the house and make major adjustments to her lifestyle

My analysis of the situation brought a major shift in the negotiations toward a divorce settlement.

I ran another scenario removing the equalization payment and reducing the duration for spousal support. We then looked at the possibility of selling the family home with both spouses downsizing their accommodations and splitting the net proceeds of the home and splitting the pension amount.

These various scenarios allowed her to feel confident in the negotiations knowing that she would be comfortable today and her future would be more secure.

In the end, the couple had received sound legal advice through their lawyer while we, as Certified Divorce Financial Analysts provided her with an equally valuable kind of support – neutral and unbiased analysis of her financial situation.

If you are thinking about getting divorced or are already in the process be sure to include a Certified Divorce Financial Analyst on your team, it could save you thousands of dollars!

 

Tesia Brooks CFP® CDFA™ successfully completed the course material for “The Financial Aspects of Divorce”, passed the examinations and was awarded the CDFA™ designation in the spring of 2010. She has a professional financial background that spans 37 years, graduating as a Certified General Accountant in 1991 and being awarded the Certified Financial Planner (CFP®) designation in 1998. Tesia has experienced divorce first hand giving her personal insight and compassion for those who are going through the experience of divorce.


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Phil’s Learning Curve – Canada Pension Plan

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– Our national public pension plan is the Canada Pension Plan (CPP) which covers everyone except residents in Quebec which, when the CPP was created in 1966 fought and won the right to create it’s own program.

– Thinking about retirement, in a couple years or more? Everyone should know a few basics about pension plans. Public or private they’re important to understand when planning for retirement. I’ll share what I’ve found out about public plans here then go over private pensions in a following blog.

– We also have two national income support programs “Old Age Security” and Guaranteed Income Supplement”. These by definition are not pensions and I’ll talk about them in another post.

– When the CPP was created the contribution rate was set at 1.8% of our “pensionable earnings” shared equally between employees and employers. Today that contribution rate is 9.9% so in 2011 for example, pensionable earnings were between $3500 and $48,300 a year. At the maximum rate you and your employer each paid $2,217.60 to the plan. (If you were self-employed you paid both employer and employee shares –  $4,435.20) This contribution amount increases every year because of indexing.

– You can start drawing benefits on the CPP at age 60 or as late as 70 years of age. The longer you delay taking payments the higher the month payment. Indexed to inflation your payments will increase every year.

– In 2011 the maximum benefit for a 65 yr old was $960/month ($11,520/yr). Most Canadians though don’t qualify for the maximum benefit as for some or all of their working lives their income was below the “pensionable earning” ceiling or they didn’t contribute for enough years. (Stay at home parents often don’t contribute while raising families for example.) The average monthly payment in 2011 was $512.38 ($6,148.56/yr). So CPP will replace only a small portion of a working person’s income on retirement, about 24% of the Maximum pensionable earning. If you earned more say $70,000 CPP would only replace 16% of the income lost on retirement.

– While your CPP benefits can begin at age 60 they are “penalized”, in 2012 it was a 31% reduction. (.52%/month prior to reaching age 65) Conversely if you postpone taking benefits your months benefit increases, in 2012 it was by .64% for every month you delay after reaching 65. So if you waited to age seventy (60 months) your CPP income would be increased by 38.4%.

– Apply those numbers to a 2011 retirees at age 60 would receive $614.40 a month ($7,372.80/yr), a 70 yr old retiree applying would receive $1,363.20 a month ($16,358.40/yr) double the benefits by waiting.

– There’s lots of other “wrinkles” built into the CPP and ways in which it can affect your retirement income, both good and bad depending on your individual and family circumstances.  See a Certified Financial Planner, start sooner than later and monitor your plan’s progress regularly. Your most important asset is good retirement income planning.

  My name is Phil and I’m a 59 year old professional who represents a pretty average Canadian worker thinking about retirement. I’ll be the first to say that “I don’t know much, but I am willing to learn”. Follow my posts here as I start the process of becoming “financially literate!”

 

 


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