There are a number of changes being made to the Canada Pension Plan. Some of the changes are being gradually implemented over several years. The changes are meant to modernize the CPP to take into consideration a number of factors including:
The fact that Canadians are living longer and healthier lives and an increasing number of Canadians are working past the age of 65;and that
Modifications are required to ensure that the CPP is financially sustainable and fair.
Some of the changes may affect when Canadians choose to retire and when they apply for their CPP benefits. For example:
Once fully implemented in 2016, those who choose to start receiving their benefits when they are 60 years old will have their benefits reduced by 36% while those who delay receiving benefits until they are 70 will see their benefits increase by 42%.
There is a new Post-Retirement Benefit (PRB) for Canadians who choose to continue to work while receiving CPP benefits:
Canadians who choose to receive their CPP benefits before they reach 65 and who continue to work must contribute to the Post-Retirement Benefit. This change was effective at the beginning of this year. Those Canadians who delay receiving CPP benefits until they are 65 and continue to work may choose to opt out of the Post-Retirement Benefit. The maximum Post-Retirement Benefit is $288 per year (adjusted for age). The PRB is cumulative and is in addition to the maximum CPP benefit. An additional $288 could be added to your benefits for every additional year you choose to work.
The requirement to either stop working or reduce earnings in order to start receiving CPP benefits has been eliminated; and
An additional year of low earnings can be excluded from the CPP benefit calculation.
Canadians who started receiving their CPP benefits prior to December 31, 2011 will not be affected by these changes as long as they remain out of the workforce. In general, a contributor who delays receiving their CPP pension until age 70 will receive approximately double the annual benefit they would have received if they had started receiving their CPP benefit at 60. If you are in good health with an average life expectancy and the means to delay receiving CPP benefits until age 70, then this may be the best decision for you. You should consider reviewing your financial situation with your financial advisor prior to making any decisions.
Don’t Forget: The 30% Ontario Tuition Rebate Application Deadline is Saturday, March 31st!
Craig McIntyre, MBA
Now that we've seen that the Ontario budget did not result in any changes to the plans for tuition rebates, we would like to remind you that the 30% Ontario Tuition Rebate application deadline is Saturday, March 31st.
Full-time students at Ontario colleges and universities can still apply for a 30% tuition rebate for the current school term. But the deadline is Saturday!
Full-time students are eligible if:
Their parents' combined gross income is $160,000 or less,
It's been less than 4 years since they left high school, and
Their programs admit students directly from high school.
The rebates available for the current semester are:
$800 for university and college degree students, and
$365 for college diploma and certificate students.
For the first full year (starting this September) the rebate amounts available will be $1,600 and $730.
Applications for students currently receiving financial help from the Ontario Student Assistance Program (OSAP) are automatic. Students who don't receive OSAP funds will need this information to apply for the 30% rebate:
Their social insurance number,
Their parents' social insurance numbers, and
The amounts appearing on line 150 of their parents 2010 personal tax returns.
Applications can be prepared online. Students and parents need to sign the printed forms and then mail or fax the forms to the Student Financial Assistance Branch.
As we all know stock markets have been more or less flat for the last 5 years and interest rates are at all time lows. These factors have left many investors pondering their options and their ability to retire as planned. Now is the time to focus on controlling what you can - such as the fees that you are paying for investment services. Do you know how much you are paying to have your portfolio managed? Many clients are unaware of their costs because the fees are hidden inside their mutual funds. This lack of transparency is an issue that the regulators are working to address. In the meantime it's investor beware. The average annual fee on a balanced portfolio of mutual funds is usually in the 2 -2.25% range. If you want to know how much of a fee you are paying you may need to read the mutual fund's prospectus, search for it online or ask your advisor.
I recently reviewed a couple's $1.3 million mutual fund portfolio and found that their average fee was over 2% - a whopping $27,000 - each and every year. The couple was not aware of it because investment companies are not required to produce statements for fees that are not tax deductible. By shopping around, the clients were able to lower their cost by 1% per year for an annual savings of $13,000! On top of that the fees are tax deductible because they moved away from mutual funds to our discretionary money management service. With returns as low as they are these days, saving 1% in fees can significantly improve your net returns and improve your odds of retiring according to plan.
You may be interested to learn about the Export Market Access grant program, run by the Ontario Chamber of Commerce. Ontario-based small- and medium-sized enterprises with sales in excess of $500,000 and with 5-50 employees are eligible to apply. Eligible activities include market research, marketing tools and direct contacts, such as foreign trade shows and foreign bidding projects. The program will cover up to 50% of eligible costs, with a maximum contribution of $30,000.
Projects must be preapproved before costs are incurred but the application process is quite simple and the turnaround is well less than 30 days.
To learn more about this grant you can go to the Export Market Access page on the Ontario Chamber of Commerce website (occ.on.ca/initiatives/ema/) or you can contact me, Kevin Goheen, for guidance on this and other grant programs.
This blog dicusses the importance of seeking independent advice before making a major financial commitment. If you are about to sign a major insurance policy, purchase a significant asset or make a large investment in a company or personal portfolio, please consult us beforehand. We've recently advised clients contemplating substantial insurance policies and private investments. The clients appreciated our objective, no-strings-attached analysis of the possible ramifications of these investments. Sometimes there are tax consequences that need to be considered. There could be impacts on your retirement, financial and/or estate plans. Sometimes it is helpful to have someone knowledgeable assisting in analyzing the amount of risk involved. Of course that someone does not have to be from McLarty & Co. We would rather you obtained the assistance of another independent finance professional than obtain no advice at all. We want you to know that we are here if you need us. We care about your financial health. We don't want to see you do anything that would impair it. Instead we want to help you to improve it.