Canada Has Two Pension PLANS

[WeednFeed]

Well we got paid today the CPP deposits are in the bank Wohoo!

In Canada we have 2 GOVERNMENT pension Plans,

CPP Canadian Pension Plan or if you live Quebec the QPP. These 2 plans are  co-pays. Meaning the employer and employee pay into it your entire working career. It is directly proportional to the amount you make up until a MAXIMUM AMOUNT PER YEAR. These plans can be taken at 60 years of age at a reduced rate. If someone chose to take it at 60 and another took there’s at 65 the two individuals would have the same amount at 72 years of age. That is if all the contributions over the previous years were equal. There are other contributing factors that would change things but for this post they need not matter.

The second GOVERNMENT pension is OAS Old Age Security! This is a set amount from the Canadian government EVERYONE gets the same starting out at age 65. This pension can be drawn back depending on your total income. So if you were a person who made good money all your life were thrifty and saved for retirement and accumulated a nice nest egg or if you worked for an employer who had a great pension plan The GOVERNMENT of Canada will REDUCE THE AMOUNT OF OAS you are entitled to.

I will be 64 this May and I’ve been receiving my CPP since a month after my 60th birthday at the reduced rate. My wife receives a smaller amount as she only worked outside the home before our daughter went to school.
 

The wife will receive her OAS this fall a month after her 65th birthday. Yes weed married an older woman. She tricked me with her 38 DD’s 22waist 36! 

I’ll receive my OAS In June 2022. Bring it on!

If someone had to live of these 2 pensions they would be living on a minimal amount so the OAS would be topped up by what the Canadian Government call the Old Age Supplement again this would be a meagre existence. So there for it is of the utmost importance to have some sort of savings if a person is to have a retirement beyond watching tv and looking at 4 walls. 

I fall into the group of people who have no employer/employee pension plan. I did however work as an electrician all my adult life and managed to save a few dollars in a thing we call RRSP Registered Retirement Pension Plan. This is a plan put in place by the Canadian government. This is the SINGLE BEST WAY FOR THE AVERAGE Canadian to save for retirement if he or she has no other pension besides CPP or OAS. 
Every dollar put into RRSP is tax free UNTIL it is taken out. I normally paid about 45% taxes on every dollar I made. So if I made $100 I paid $45 tax. So if I put this $100 into RRSP I actually invested %100 if I paid the tax on my money I could only invest $55.  The whole idea is to ONLY take this RRSP money out after retirement at a lower tax rate. My tax rate now where I’m not working anymore is 24.68%. So essentially I made 20% on my money simply by DEFERRING THE TAXES on that money. Now if you were smart where you invested your RRSP contributions over the years you would have made more money towards retirement.

The single best way for someone in Canada to save for retirement is the RRSP! Sadly some folks never get the opportunity as they are stuck in loop of life just trying to survive on a minimal wage. 

 

 

[major-mark63]

hi Weed ,

RRSP i think is good only for poeple have a higher tax rate when working.(over 57000$ a year)

Low income workers  wouldnt have a net save on tax when retiring RRSP.

So these poeple if they retire RRSP at 65 plus they gonna increase their icome and they would miss the supplements.

i think max family income is 28000$/yr.

A family who live only with provincial plan and old age would have 25000$ not much place to reitre rrsp.

So i read that low income family shoulnt have RRSP useless.

By the way im retired certified industrial electrician too.

[TBB]

Boy - you guys are real >IDIOTS< - marry a rich older woman and avoid all the crap!

[Sharpe]

 

 

[WeednFeed]

5 hours ago, major-mark63 said:

hi Weed ,

RRSP i think is good only for poeple have a higher tax rate when working.(over 57000$ a year)

Low income workers  wouldnt have a net save on tax when retiring RRSP.

So these poeple if they retire RRSP at 65 plus they gonna increase their icome and they would miss the supplements.

i think max family income is 28000$/yr.

A family who live only with provincial plan and old age would have 25000$ not much place to reitre rrsp.

So i read that low income family shoulnt have RRSP useless.

By the way im retired certified industrial electrician too.

Yes you are correct in order to take advantage of the RRSP you need to make a descent wage.

The single best thing to do in order to take advantage of the OAS SUPPLEMENT is to RETIRE EARLY BEFORE 65! Withdraw as much of that RRSP as you can for several years before 65. If you do it that way you can take out $42,000 for you and $42,000 for your wife at 24.68% tax. Take as much of that as you can and invest it in TFSA Tax Free Saving Account. Now you have a nest egg. Then after 65 only take out enough money from your RRSP to qualify for the OAS supplement!. As you need more $$ through the year take from the TFSA. TFSA the tax has already been paid at the lower rate of 24.68%.

[PimpedOutPete]

Great conversation Guys.

There are several points that have not been discussed when if comes to CPP (Canada Pension Plan). As we speak the US is facing a crisis in Social Security in which it potentially will be insolvent in 10 plus years. The reason I know is my wife and myself are the few in that we file taxes for the US and Canada. 

In the US system your social security payments go directly into the US Treasury where it can be used to pay people already on Social Security. It also is used to pay for programs such as Medicare. As we all know the cost of medical care is rising in the US like made and programs like Medicare continue to rise. There is a shortage of new members and plenty of baby boomers drawing which makes even more of problem. The benefit is you get more of a return with less put into it.

In Canada, 1996 the federal government realized we were going into the same direction and they changed course. As a direct result of this public consultation process and internal review of the CPP, key changes were proposed and jointly approved by the Federal and provincial governments in 1997.  Moved towards a hybrid structure to take advantage of investment earnings on accumulated assets. Create the CPP Investment Board that is independent from the federal government, and the government cant withdraw from it.  It ended up making the program successful.

The advantage to RRSP is that if you invest in a modest amount over the long hall, you can create a nice nest egg for retirement for you get much better rates of return compared to TFSA Tax Free Saving Account. Only issue? You need to invest long term. Also, when you retire, you do get to taxed but at the lowest rate and potentially may get a return still but Im not sure about that. Also which i think was not mentioned is you get to claim almost 20% of your RRSP contribution right off your return which is a bonus right away. Most employers will also match your contributions dollar for dollar up to 8%, that again it could be more.

With the RRSP program The federal government will also let you use it for the Home Buyers Program and the Student Load Program. In both cases you can borrow X amount tax and interest free as long as you replay it in 20 years. 

For short term spending Weed is right on, Th TFSA Tax Free Saving Account is the way to go. 

Awesome topic guys. 

Edited January 28, 2021 by PimpedOutPete

[WeednFeed]

Just to add about the TFSA everyone is limited to the amount they can put in per year since it’s inception. That amount today if you turned 18 in 2009 or before and did not invest any previous amount you could invest a max of $75,000 in one lump sum in 2021. I only wish I had it lol!

Edited January 28, 2021 by WeednFeed

[AthenA]

I'll definitely have to re-read all of this when I'll be less tired, because I'm retiring in 8 years and a half and I'll be in my very early 50's. I have a plan with the government though, as I work in education. Thanks for sharing all of these infos guys !

[PimpedOutPete]

35 minutes ago, AthenA said:

I'll definitely have to re-read all of this when I'll be less tired, because I'm retiring in 8 years and a half and I'll be in my very early 50's. I have a plan with the government though, as I work in education. Thanks for sharing all of these infos guys !

Hey Athena, I am right with you. I give myself less than 6 more years and I am done, both myself and my wife will be age 60 then. We have our home paid off, like weed mentioned we are pouring what we paid into our mortgage into a tax free account. We will sell our home in Calgary and purchase a home on Vancouver Island, case for case. Our advisor said we are at the 91% of where we want to live when we retire.

Biggest obsticle is health, nothing in life is guaranteed. 

[major-mark63]

9 hours ago, TBB said:

Boy - you guys are real >IDIOTS< - marry a rich older woman and avoid all the crap!

Yes i did try too , but the only available rich women were not much cute but with a fucking rude caracter or too dumb , so i chose a nicer one with less money..

[major-mark63]

from my side i retired early and already spent a lot on trips and cruises (except this covid year ffs) but when will be ok to travel well do twice the amount travelling .

Still have 7 yrs ahead of living only on 70 % GMC pension and RRSP.

[major-mark63]

1 hour ago, AthenA said:

I'll definitely have to re-read all of this when I'll be less tired, because I'm retiring in 8 years and a half and I'll be in my very early 50's. I have a plan with the government though, as I work in education. Thanks for sharing all of these infos guys !

Athena if you  will have the REGOP pension the amount is good , my girlfriend has only 22 yrs of teaching and the pension is ok.

[WeednFeed]

Everything I posted is very specific to certain individuals. If you have two incomes and two pensions in the household it is VERY UNLIKELY you will qualify for the OAS Supplement.

The single best thing to do is MAKE SURE YOU HAVE A GOOD INVESTOR! The investor you pick should have your best interest as they're number 1 priority. Too many investors have greed in their eyes and look at their clients as a BIG PAYCHECK.

You as a client need to remember this, the MONEY YOU ARE INVESTING IS YOUR MONEY! The investor needs to understand this from day 1. You have  right to fully understand what the Financial Institute and investor are making in the way of fees. If the investor can't explain everything to you clearly then walk away. You also must investigate everything they tell you and you must fully understand the risks. If you don't understand then lock your money up in a safe place like GIC's until you understand what you are investing in. Too many people have been duped into bad investments.

Edited January 28, 2021 by WeednFeed

[AthenA]

22 hours ago, PimpedOutPete said:

Hey Athena, I am right with you. I give myself less than 6 more years and I am done, both myself and my wife will be age 60 then. We have our home paid off, like weed mentioned we are pouring what we paid into our mortgage into a tax free account. We will sell our home in Calgary and purchase a home on Vancouver Island, case for case. Our advisor said we are at the 91% of where we want to live when we retire.

Biggest obsticle is health, nothing in life is guaranteed. 

You two have great plans and, as you're right about health, I certainly hope that it'll be with you and with all of us to enjoy a nice retirement.

21 hours ago, major-mark63 said:

Athena if you  will have the REGOP pension the amount is good , my girlfriend has only 22 yrs of teaching and the pension is ok.

Yes Mark, it's the RREGOP and I'll have 35 years of service then so it means  no penalty even if I'll be 53.