New CPP Rules

Retirement planning is so important because things change overtime and there is no guarantee what type of government benefits will be available to you once you finally reach the age of retirement. The younger you are the wider that gap and planning for retirement at a younger age is less expensive and gives you more time to ensure that you are prepared and financially stable once you are ready to retire.

Just this year some good news was reported about Canada Pension Plan benefits. As of this year, you no longer have to stop working to draw CPP. You can simultaneously receive and accrue CPP benefits between the ages of 60 and 70, which means you have increased potential to improve your retirement finances.

Beginning January 1 of this year, you can continue to work while collecting CPP benefits. The old rules stipulating that you had to stop working to collect early CPP benefits no longer apply.

If you’re between 60 and 65, employee and employer contributions to CPP will still be required. However, if you work between the ages of 65 and 70, contributions will be optional. If you want to continue to contribute to CPP as an employee, your employer must also continue to contribute.

For residents of Quebec, similar rules apply under the Quebec Pension Plan (QPP). QPP allows for “phased” retirement between the ages of 60 and 65. To collect QPP before age 65, your estimated employment earnings for the first 12 months during which a pension is paid must not exceed $12,075 in 2011 (other conditions apply). You will continue to contribute to the plan, which will provide you with a retirement pension supplement the following year.

While the new CPP changes mean good news for people coming up to retirement, does that guarantee that CPP coverage will exist at all once 20, 30 and 40 somethings are coming up to retirement?

In recent weeks, news outlets including the London Community News reported protests that took place at MP’s offices around the province. These protest occurred because while there have been some positive reforms to CPP, the Harper Government recently announced plans to increase the retirement age from 65 to 67 and cut Old Age Security (OAS) benefits.

Because we contribute taxes to coverage’s that the government may provide today does not guarantee that they will be there tomorrow. Even when you look at the monthly income one receives on CPP and OAS now, it is barely enough to survive. The best thing a family can do is work with their insurance provider to come up with an insurance strategy that deals with both what will happen if you die but also what will happen if you end up living a long, long life. There is insurance available that can provide income, protects income, provides long term care, protects you against critical illness and more so it is very important if you want to guarantee comfort in life and in retirement that you start planning and preparing now. Gary Mandel

In : Taxes

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