neither do I to tell you the truth.
Here's the situation. My parents are about to retire and they don't have a clue what to do financially.
They both have RRSPs and other assets like a house, cash, investments and so on.
The problem is that they really don't have a plan. They are old school and we really have never talked about their money. They are worried about their RRSPS and RIFS, benefits they are about to receive from the government and so on.
My problem is that I don't know much more than them. I know some basics, but I'm not an expert.
What I need is a primer on the web or a book or some advice so that I can educate myself and then offer them some very basic advice.
For starters, can anyone offer any information on what benefits they are about to collect??
Cheers and thanks in advance.
Claudio
The most pertinent question is how old are your parents or how far away are they from turning 65?
There are 4 primary sources of retirement income:
1. Canada Pension Plan - CPP
The amounts received are based on the amount an individual puts into the plan over their working career. You can start to take CPP at age 60 and must start receiving it by the time an individual turns 70. For each year before 65 you take your pension you get a couple of percent the of amount you would receive lopped off. Similarly, for each year after 65 you get an extra couple of percent. IE: if at age 65 your CPP would be $700/month, if you start taking at 63 it would end up at maybe $660/month and if you start taking at 67 you might get 750/moonth.
I believe for ppl currently turning 65, there was no incentive to wait until after 65 as the additional amount was quite small and in some cases takes years to recoup (i think for my dad it would have taken 15 years for him to have received the same total pension if starting at 70 vs 65).
I should add that you can only start taking pension before 65 if you are currently out of work. Strangely, you only have to be out of work for the month after you start receiving pension. What this means is that many ppl get their pension, dont work for a month and then go back to work while collecting their pension. It seems like a large loophole, but depending on cash flow needs ive seen many ppl do this.
In terms of getting this money, you simply have to apply. You can send in the application online which asks some ID questions, but if I remember correctly does not require any supporting information (like copies of passports etc etc). There is a signature pagethat has to be mailed in regardless of whether your file on line or not. The government determiens how much you are entitled to.
2. Old Age Security - OAS
Starts at 65. The maximum benefit is about $500 per month. The amount that an individual receives is based on how long they have been in Canada. You have to have spent 40 years since turning 18 to get the full pension. Below 40 years, you get a fraction depending on how long you have been in Canada. There are some other exceptions and rules that might specifically determine how much you will receive.
Again yuo have to apply for this. This application, unless you were born in Canada, requires proof of citizenship, and also proof showing how long you have been in Canada (so for example if you state you entered Canada december 15, 1975, you would need proof that shows that, such as the entry mark on your old passport). The govt determines how much you are entitled to.
3. Registered Retirement Savings Plan - RRSP
Money has to be moved from RRSP to an RRIF or other similar account by the time turn 69/70. There are different options. You can continue to contribute to yuor RRSP until 69 and once you are done contributing to your own you can contribute to your spouses RRSP until they are 69 as well.
4. Company pension
May or may not apply. The company and their pension provider would be responsible for determining how much you receive depending on how long you have worked, the type of plan etc. I imagine you would inform them of your retirement once you are ready to collect.
Things to consider:
-OAS gets clawed back once an individual total icnome for the year goes beyond about 65k
-Low income retirees, ie no company pension, no RRSP, are eligible for the guaranteed income supplement which adds about another 600/month to monthly pension payments
Hope this little primer helps...not an expert by any means but i do have some familiarity so id be happy to help any way i can
