BY: FAZAAD BACCHUS
Most Canadians are entitled to some sort of government benefits when they retire. These benefits are further enhanced depending on how long you have lived in Canada and how much you may have contributed as well. If you do not plan your retirement deposits properly you may have to depend on these benefits. And if you do not plan your withdrawal properly you could be losing out on some of your government benefits. But first, let us look at what is typically available to Canadians and how you may qualify for them.
The Canada Pension Plan (CPP) is a Government run program funded by mandatory contributions. Currently, contributions are 4.95% of your income and for self-employed, it’s 9.9% of your net business income. The amount that you will expect to receive is based on a number of contributions you made over the years. Normal retirement age is 65 to start receiving your pension however you can start receiving your CPP from as early as age 60 or defer until age 70. Both have disadvantages and advantages. If you start earlier, it is a reduced amount, but payable for a longer period and if you start later it’s a higher amount, but payable for a shorter period. The maximum monthly CPP retirement benefit for 2017 nonetheless is $1,147.17
While this is the maximum, there are many who will not qualify for it, especially new immigrants who have not had the full amount of contributory years here. To be eligible for the maximum one has to have a solid employment record and have contributed also at the highest levels. Typically, I see many persons falling somewhere around $500.00 to $700.00 per month. For some who have arrived in this country during their retirement years, they will not be entitled to any CPP at all, as they haven’t made any contributions.
When you have attained the age of 65 and have lived for at least ten years in Canada, you are eligible to apply for Old Age Security pension. This is a non-contributory social assistance program from the tax revenues of the Federal Government. This means you are entitled to an amount of OAS pension without having to have made a contribution towards it. However, to know how much you can qualify for as an example, if you lived here for sixteen years the formula is $578.53 divided by 40 x 16 = $231.00 (approximately). However, if you are earning in excess 73,756 annually your payment will start to be clawed back. The maximum OAS monthly pension for 2017 is $578.53
As you can see for a newcomer with less than ten years here, there isn’t anything much to be had from CPP and OAS. Your final benefit as an individual is the Guaranteed Income Supplement (GIS). This amount is subject to an income test and is not payable if you are earning RRIF, CPP, and OAS above a certain amount. The maximum GIS monthly amount for 2017 is $864.09.
All the same, each individual is different with differing circumstances and the above article is only a guide. Therefore, to maximize the benefits available to you, it may be beneficial not to take certain benefits as yet.