Retirement Planning Flashcards
What are the eligibility requirements to receive the Allowance from OAS program?
You qualify for the Allowance if you meet all of the following conditions:
- you are aged 60 to 64 (includes the month of your 65th birthday);
- your spouse or common-law partner receives an Old Age Security pension (OAS) and is eligible for the Guaranteed Income Supplement (GIS);
- you are a Canadian citizen or a legal resident; -you reside in Canada and have resided in Canada for at least 10 years since the age of 18; and
- you and your spouse or common-law partner’s annual combined income is less than the maximum allowable annual threshold.
During what time period are contributions made to CPP.
Begins when an individual reaches age 18 and continues until an individual beings receiving his/her retirement pension, reaches age 70, or dies.
What is the amount that you have to contribute to CPP each year.
Employed - 4.95% x (YMPE-YBE 3500) Self Employed - 9.9% x (YMPE-YBE 3,500). Contributions are based on net business income (after expenses)
What is the YMPE in 2016?
54,900 Therefore, pensionable earnings = (54,900-3500) = 51,400
What is included in the CPP Benefits
Disability Benefits - paid for disabled contributors and benefits for their dependent children. Retirement pension - paid when an individual substantially ceases working. Survivor Benefits -Includes the death benefits, survivors pension, and the children’s benefit. New Post Retirement Benefit - fully indexed lifetime benefit that increases retirement income
At what age is an individual eligible to receive full benefits.
65 is the normal age when someone is eligible to receive full CPP retirement benefits. They can be received as early as 60 or delayed until age 70. If a pensioner elects to receive CPP prior to 65 - lifetime benefit is reduced by a factor of 0.6% per month, or 7.2% per year. If they elect to receive after 65, lifetime benefit is increased by a factor of 0.7% per month, for each month after age 65.
Explain what CPP Pension credits are
The CPP keeps a record of earnings and contributions paid over the years. These are referred to as pension credits. Generally, the more credits you have, the higher your CPP benefits will be. When a marriage or common-law partnership ends, the CPP credits built up by the couple during the time they lived together, can be divided equally between them, even if one spouse or common-law partner did not work.
Explain how CPP Pension Sharing works
Pension sharing adjusts the amount of the monthly retirement pension each spouse/common-law partner receives from the CPP. Married or common law partners who are together, who are both at least 60 years of age, and who receive CPP retirement pensions can share their pension benefits on the portion of the benefit earned during their time together.
In what circumstances can CPP credit sharing occur?
By separation agreement
By court order
By an application to CPP
For divorced spouses, either can make the application. For married spouses, a mutual application must be made.
When is there no penalty for a non-contributory period to the CPP?
When you are raising a child under the age of 7
If you live outside of Canada, will you still receive CPP?
Yes, payments are made anywhere in the world in the local currency when applicable and, if not, in Canadian dollars, provided you meet all CPP eligibility conditions.
Is CPP Taxable?
Yes - reported on T4A(P) slip.
What is the Old Age Security program?
Financed from general federal tax revenue, it pays monthly pension benefits to all Canadians 65 and over who meet the residence requirements, and some supplementary benefits to eligible low-income seniors 60 and over. All benefits under this program are adjusted quarterly, if necessary, to reflect increases in the cost of living. Must be applied for, and retroactive payments can be made for a maximum of 11 months.
What are the benefits offered by Old Age Security?
- OAS pension 2. the Guaranteed Income Supplement, and 3. the Allowance (including the allowance for the survivor)
Is OAS taxable?
Yes
St what income level does OAS start being clawed back?
In 2016, between 72,809 to 118,055
What is the eligibility requirements for OAS pension?
- 65 years and older 2. Canadian citizens or legal residents of Canada at the time the pension is approved 3. Must have resided in Canada for at least 10 years after the age of 18 (years resident in countries with social security agreements may be used) Usually, need to have normally resided in Canada for 10 years immediately before approval, however under certain circumstances an exception can be made. A person who, after the age of 18, lived in Canada for a least 3 years fro each year of absence during that 10-year period, and also resided in Canada for at least 1 year immediately before the application is approved.
How long do you have to have resided in Canada to get the full OAS benefit.
40 years after reaching the age of 18. You can apply for a partial pension if you resided in Canada or at least 10 years after the age of 18. A partial pension is paid at the rate of 1/40th of the full monthly pension for each full year of residence in Canada after the applicant’s 18th birthday.
Can OAS pension be received outside of Canada?
To receive payments when no longer residing in Canada, applicant must have been a Canadian citizen or a legal resident of Canada when he or she left. Once a full or partial OAS pension is approved, it may be paid indefinitely outside Canada if the pensioner has resided in Canada for at least 20 years after reaching the age of 18. If the person does not meet the 20 year residence requirement, payment may be made only for the month when he or she leaves Canada, and the following 6 months.
What is the Guaranteed Income Supplement?
GIS is a monthly benefit paid to residents of Canada who are eligible to receive an OAS pension (full or partial) and have little or no other income. Must be approved for and renewed annually (usually can reapply automatically by filing their annual income tax return by April 30th) and monthly payments may increase or decrease according to changes in the recipient’s annual income and marital status.
Is GIS taxable?
NO
How is income determined for calculating GIS benefit?
Same way as for federal income tax purposes with a few exceptions - OAS is not considered income.
What is the Allowance and the Allowance for the Survivor under OAS?
Benefits for 60-64 year old low-income seniors. Needs to be applied for each year, and are not considered to be income for tax purposes. Benefits are not payable outside of Canada beyond a period of six months after the month of departure, regardless of how long the person resided in Canada.
What are the eligibility requirements for the Allowance under OAS?
May be paid to the spouse or common-law partner of an OAS-pensioner who is eligible for the GIS, and the allowance for the survivor to a senior whose spouse or common-law partner has died. Need to be between 60 and 64 Have resided in Canada for at least 10 years after turning 18. Must be a Canadian citizen or a legal resident of Canada on the day before approval of the application.
How do you calculate the benefit received in a defined benefit plan?
Benefit = average earnings x benefit factor x # of years of pensionable service or Benefit = flat amount x # of years of pensionable service
What is the formula to calculate the earliest retirement age with unreduced pension benefit?
Age = (Age when employee joined plan + qualifying factor)/2
What is the Money Purchase limit for pensions for 2016?
$26,010
