It's time to retire and they have no clue what to do

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

Loaning money to your spouse for income splitting purposes

How does this actually work for people with combined bank accounts (ie, how is the interest paid)? Would you just use the shared money and put the brokerage account in the lower income spouse's name? Would paying interest be necessary or would it be considered a gift?

Another thing (from http://www.rbcfinancialplanning.com/...t-purpose.html)

Another simple but very beneficial strategy is to use the income of the higher earning spouse to pay living expenses and tax liabilities and use the income of the lower earning spouse to make investments. This way, investment income earned will be taxed at the lower earning spouses’ rate.

Again, how would this be done if you have joint accounts? Just putting the investments in the lower income spouse's name?

 
According to the link you posted, no interest = attribution rule applies, so yes paying interest would be necessary.  I would 100% set-up separate accounts to attempt this. That way you have a paper trail to give the CRA if/when they accuse you of tax evasion (and then you can prove it was only tax avoidance, which is legal).

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As mentioned by the other poster, you need to charge interest or attribution rules will apply. It is even better to have a signed contract (see a lawyer) which states loan amount, interest rate, and repayment terms so that it is a bonafide loan and cannot be challenged by CRA. The interest rate you would want to charge would be the lowest rate you can so you are not stuck including a lot of interest income on your tax return. Check the CRA website for prescribed interest rates and use these rates as the interest rate. Hope this helps.

PS. I am a Chartered Accountant and have done this for clients in the past. With the low interest rate environment that we live in, prescribed rates are really low and can be really beneficial in income splitting and loans to spouses. 

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you should be aware your spouse is still paying you taxable interest. so you have to declare that interest as income. if you don't then you'll get hit with the attribution rules.
and this isn't a one time thing. the loan goes on until it's fully paid back, so you'll keep earning interest from your spouse until it's paid off.

just something to consider

CRA Rules re Joint Investment Income

Hello,


Looking for some help re a joint savings account for two individuals. I gather the typical institution reports interest income on the primary owner's tax slip.


What exactly are the rules re basic investment income (interest) splitting? Are we only allowed to do a 50/50 split regardless of whose slip the amount appears?


Thanks.

Interest should be reported based on the amount of money each person deposits to the account. It doesn't really depend on the SIN number on the slip.

E.g. if one person puts in 60% of the principal in the account and the other 40%, that's how the income should be reported.

It is common practice to simply split the income 50/50.

Ideally, the lowest income earner would save 100% of their income and report the interest due to the preferable tax rates. The higher income earned should pay all the bills in order for the lower earner to invest.

Ontario Student Loan Default from 1996 -- Question re Statute of Limitations

I had an OSAP loan back in 1996.

This was back when the bank would take the loan and it was funded through the government (two parts to loan, federal part and provincial part).

Long story short, I defaulted on about 7k owing for the federal portion of the loan. For several years collection agencies called me. After awhile the calls stopped. I called one of the collection agencies around 98 - 99 and they said that the loan had been recalled by the bank.

Around 2005 I tried to track down who I needed to pay spending hours on the phone. Nobody could find any record of the loan. Not on my credit bureau, not through National Student Loan Centre, various government departments, I even called ScotiaBank with the loan number and they couldn't find it (I think that I got the loan in the year just before they changed the whole OSAP system to one integrated loan done through the government instead of the banks.)

Finally I gave up and figured as long as it's not hurting my credit score who cares.

Has the statute of limitations passed on this debt? I know 10 years needs to go by from when you were last in school, however I returned to college in 2005 for one year.

Just worried that one day in the future I'm going to get a call "You owe us the original 7k + god knows how much interest". 

Canada Student loans granted under the Canada Student Loan Act and the Canada Student Financial Assistance Act have a six year limitation with exceptions as outlined in the Acts. Read them as they can be read online. Ontario has no limitation period for student loans. The new Limitations Act which has a basic limitation period of two years specifically notes that such limitation period does not relate to student loans. See also Interpretations Act in Ontario re crown debt.

If you have gone bankrupt prior to the expiration of the 10 year limitation period set out in s. 178 1g of the Bankruptcy and Insolvency Act, you may apply to the bankruptcy court after the expiration of the 10 yr period for an order including the loans in your earlier bankruptcy provided you have acted in good faith regarding payment of the loan and the debt continues to be an ongoing burden. See s. 178 1,1 of the BIA. I have made over 70 such applications for clients all of which have been successful.

Childcare tax question

How much you can deduct for childcare expenses? If you paying $x per month, how much do you get back on your taxes? Which spouse should claim the deductions? 

http://www.cra-arc.gc.ca/E/pbg/tf/t778/t778-10e.pdf

an excellent 4 pages in detail on the topic. if you have child care expenses every year like I do, you may want to educate yourself. it is just a quick 15 min reading but very informative knowledge.

have fun. 

Real estate agent for rental unit..what are they responsible for?

I was wondering what is the job of a real estate agent for a rental property?...are they suppose to check on references,credit history of the potential tenant?..if there is issues with the tenant do they assist the owner?... 

 The buyer agent is responsible for bringing the seller agent a client. Both agents ensure that both parties are happy with any reference checks or whatever. The value added is just a series of very minor paperwork and gathering of documentation like credit report and drafting the agreement etc. Surely advice is thrown around somewhere.

Do they assist owner? Probably not. After they collect their commission, they'll probably never want to talk to you again. This is why most people prefer to have a friend or relative as their agent.

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What a real estate agent does will be highly variable. The minimum level of service is very minimum: they'll put an ad on MLS, and help you find a tenant if they've got nothing better to do.

Good agents may also take pictures of the property, put ads up on other sites and/or in the newspaper, show the property to tenants (or let a buyer's agent bring tenants by), and if you're really lucky, they may help you do a credit check or swing by staples to pick up a lease document for you.

Bad agents (and I've seen many) will put the ad up on MLS and then not even return phone calls from prospective tenants -- and if they do, they may just try to sell the tenant on buying, not owning, so they can get a buyer's agent commission, and not a month's rent from your rental ad.

I don't think any will help you out with the ongoing stuff like collecting cheques or dealing with issues down the line. For that you want a rental agent or property manager, not a real estate agent (though sometimes a rental agent who will help with that also happens to be a real estate agent).

If you're in Toronto, some people I can recommend 2nd or 3rd hand (don't own a rental myself):

http://landlordrescue.ca/service/

Rogers wireless phone plan cancellation penalty...

Hi there,

Just wondering if you anyone had experience with cancelling their wireless phone contract with Rogers...
I still have 2 years left with my 3 year contract with Rogers, and they are charging me $400 for the maximum monthly penalty and on top of that $100 for the data plan cancellation. They said the only way to avoid the penalty is to transfer the plan to someone else.

Does anyone know other ways around this hefty cancellation penalty?

Any help would be much appreciated!

Thanks. 

- If it's for the sake of iPhone 4, you will need to wait another year before you can get another subsidize phone from Rogers (and extend the contract by 3 more years).
- If it's for affordability, call retention and negotiate an affordable plan.

If you really need to get rid of it.
1. Get Rogers retention plan.. to make it attractive.
2. Post your plan in kijiji, craiglist or RFD - FS section.

2 years contract will be a hard sell. You might need to add some cash incentive... Better than paying $500 to cancel it.

if your plan is good, u can convince someone to take over your contract, and that way u'll not need to pay anything (assuming that the person is not asking for money to take over your plan).