HomeMy WebLinkAboutThe Citizen, 1990-02-07, Page 19X THE CITIZEN, WEDNESDAY, FEBRUARY 7, 1990. PAGE 19.
Don’t count on Ottawa in retirement years
By PAUL KUTTNER__________
Royal Trust
Many Canadians seem to
have a relaxed attitude when it
comes to retirement planning.
They happily spend thousands
of dollars a week in the sun in
investing that money for
retirement, they just smile.
Next year, maybe.
There may be two reasons for
this. The first is psychological
— until you reach 50, retire
ment seems too far away to
worry about. The second is a
vague impression that “some
one else” will provide the in
come needed to maintain
today’s lifestyle after retire
ment.
That someone else usually is
the employer’s pension and
government programs, such as
the Canada (or Quebec) Pen
sion Plan and Old Age Security.
The harsh truth, however, is
that if you rely exclusively on
these sources, you may spend
your retirement years simply
struggling. Sadly, many retired
Canadians live below the
poverty line because they
didn’t plan for their post-work
ing years when they had the
chance.
Let’s review the government
programs first. The oldest and
best known is Old Age Security,
a universal program that
begins when you reach age 65
(you must apply to receive
benefits; they’re not automat
ic). The amount is adjusted
quarterly; currently it’s
$337.04 a month, or just above
$4,000 a year.
OAS payments are fully in
dexed for inflation, so their
purchasing power will be
maintained in the future. How
ever, it’s doubtful they’ll be in
creased by more than the cost-
of-living increase.
There’s also a chance some or
all of your OAS payment may
be taxed back when you reach
retirement. Finance Minister
Wilson introduced a controver
sial “clawback” provision last
April that will hit OAS benefits
of anyone with more than
$50,000 income.
Only a small percentage of
older Canadians are affected
immediately. But the $50,000
threshold is not fully indexed
for inflation. Only increases in
the Consumer Price Index
(CPI) increases greater than 3
per cent will be applied.
This means even t.hnrfah oaq
is still theoretically a “univer
sal” program you simply can’t
count on receiving full benefit
from it if your retirement is
several years away.
The Canada and Quebec Pen
sion Plans are designed to pro
vide a basic retirement income.
Only those who have paid into
one of the programs can make
claims against it. Maximum
benefit this year is $6,675 an
nually. As with the OAS, you
must make formal application
to receive benefits.
The CPP is fully indexed for
inflation but payments won’t
increase beyond that. So the
current level represents the
buying power you’ll receive
when you retire.
There is some flexibility in
how you receive your benefits,
however. You can if you wish,
split the monthly CPP pay
ments with your spouse, except
in Quebec. This may save some
tax dollars and also could help
you avoid the OAS clawback by
keeping both of you under the
income threshold.
The full CPP benefit becomes
payable at age 65. You may
apply before then (as long as
you’re 60 or older) and receive
a reduced benefit. Or you can
Deposit brokers will find
best GIC or RRSP
If you’re like most smaller investors, you’re often confused
by the huge range of term deposits, GICs and RRSPs all
competing for your dollar. How often have you agonized long
and hard to make a choice, only to wonder afterwards if you
overlooked a better deal?
Well, there are people around to help you get the best rate
available for the term you want and with an appropriate level
of safeguards to protect your investment.
These are the professional deposit brokers — member® of the
Federation of Canadian Independent Deposit Brokers Inc. —
and you can find them in almost all parts of Canada.
They act as agents for trust companies and some chartered
banks and shop the market at least once a day to look for the
best deals. Futhermore, their service is free to you because the
brokers are paid commissions by the financial institutions
where they place your business.
The federation has strict standards of professional ethics and
most of its members have long-established clienteles, so you’re
going to be in good hands.
But make sure you’re dealing with a professional, full-time
deposit broker with the proper credentials. Remember, there
are some real phonies out there, including bait-and-switch
artists who promise top rates to get you in the door, only to
switch your money into something much less attractive once
you’re hooked.
To find out more about the Federation of Canadian Inde
pendent Deposit Brokers Inc. and its members across Canada,
write Kenneth A. Brown, Secretary-Treasurer, 18 Levendale
Rd., Richmond Hill, Ont. L4C 4H2.
Yes, You Can Retire A
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8 Alfred Street
delay your payments until as
late as age 70, in which case
your benefits will be increased
by as much as 30 per cent.
What does it all add up to? If
you receive the full CPPbenefit
and can avoid havingyour OAS
payments taxed back, the
value of your annual retire
ment income from the federal
government will amount to
$10,828 in terms of today’s
buying power. You’re not going
to live vefry comfortably on
that.
The bottom line is payments
from government assistance
programs will provide no more
than a fraction of your total
retirement income needs.
You’ll have to look elsewhere
for most of your post-retire
ment revenue.
Pannell
Kerr A local firm with national and
N \’llixmox r international affiliations when1 Vlcll ajI lllvl dy you need them
Chartered Accountants
LISTOWEL GODERICH WINGHAM
291-1251 524-2677 357-3231
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