• Ward Report 8: 2015 Federal Budget Changes to RIF Payments

    19 October 2015

    The 2015 Federal Budget proposed to reduce the minimum withdrawal factors applicable to RRIF/LIF holders that are between the ages of 71 and 94 years of age inclusive. The reduced factor changes were included in Economic Action Plan 2015 Act, no. 1 (Bill C-59). The minimum RRIF* withdrawal factors applied before the age of 71, obtained by the formula 1/(90-age), remain unchanged.

    The new factors will apply to 2015 and subsequent taxation years. The CRA has allowed financial institutions and individuals to comply with the proposed measures before they come into force.

    *The mention of RRIF includes all immobilized disbursement products such as: LIF, Restricted LIF, LRIF, regulatory prescribed RIF.

    As a retirement income account holder, you have the following options:

    1. Continue to receive payments (based on the original 2015 RRIF minimum)
      • You are not obligated to reduce the new 2015 minimum rates; you can choose to take no action.
    2. Minimum reduction
      • If you are already receiving minimum payments, you may reduce the annual minimum and reduce the future payments or stop future payments if the revised minimum amount has now been paid.
      • If the new minimum is less than the amounts that have already been paid, the fund company will reduce upon request the minimum to amounts paid or the new minimum whichever is greater.

    Example: Original minimum = $10,000.00, revised minimum = $7,000.00, amounts paid = $8,000.00. Minimum will be reduced to $8,000.000 and payments will resume in 2016.

    1. Minimum re-contribution
      • If you have already taken your payments from the plan for the year you can choose to re-contribute the difference between the old minimum and the new minimum by February 29, 2016.
      • The fund company will advise you (upon request) of the amount eligible for re-contribution in writing as required by the CRA.
        • Note: That you are required to retain the notice of re-contribution should the CRA ask to review it.
      • If you make a re-contribution, you will be provided with a 60(L) (V) Contribution receipt by March 2016 which is to be used when recording the deduction on your 2015 Income Tax Return.
        • Note: The 60(L) (V) receipt indicates will display “RRSP Contribution Receipt” as the CRA does not have a template for RRIF contributions. This receipt can be used for reporting the deduction.

    Example: If you have received an amount equal to the original minimum:

    • Jane’s original 2015 minimum was $10,000.00 and her reduced 2015 minimum is $7,500.00.
    • Part-way through 2015, Jane has already received $10,000.000 from her plan and has no further payments scheduled.

    Here’s what Jane can do:

    • Do nothing or …
    • Re-contribute up to $2,500.00 to her plan by February 29, 2016. Jane will report as the full amount withdrawn from her plan as income (which will be at least $10,000.00) on her 2015 income tax return, but if she decides to make a re-contribution, she can claim a tax deduction for the amount of the re-contribution.
    1. Combination of the above noted scenarios
      • If you have redeemed from your income plan, but also have an amount of the original minimum left to redeem you can request a reduction and you will be provided with a notice of the amount eligible for re-contribution (if you wish to re-contribute).

    Example: John has received an amount less than his original minimum, but greater than reduced minimum:

    • John’s original 2015 minimum was $10,000.00, and his reduced 2015 minimum is $7,500.00.
    • Part-way through 2015, he already received $8,000.00 from his plan, and is scheduled to redeem a further $2,000.00 later in the year.

    Here’s what John can do:

    • John can continue to receive a further $2,000.00 this year, and re-contribute up to $2,500.00 to his plan by February 29, 2016, or …
    • He can stop further payments at the $8,000.00 already reached, and then re-contribute up to $500 to his plan by February 29, 2016.
    • John will report the full amount withdrawn from his plan (which will be at least $8,000.00) as income on his 2015 income tax return, but if he makes a re-contribution, he can also claim a tax deduction for the amount of the re-contribution.

    If a re-contribution is made, a 60(L) (V) contribution receipt will be issued by mid-March 2016, representing the re-contributed amount.

    If you have any questions or concerns regarding the above-mentioned retirement income payment changes, please contact us at the office.

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  • Retire sooner than you’d expect – Manulife RetirementPlus

    17 August 2014

    Manulife RetirementPlus – It can enhance your future guaranteed income, so you’re prepared for your retirement sooner.

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  • The Ward Report 1: The CPP Conundrum

    12 May 2014


    All of the sudden … it happens. One day you are finishing college or university, excited about the prospect of leaving your stamp on the workforce … then 40 or so years later retirement is looming. Beginning as early as the 60 years old, you can begin to access those Canada Pension Plan (CPP) benefits that you see on every pay stub. However, the average person doesn’t truly understand how CPP payments work and what the benefits and implications are of early retirement.

    CPP is meant to be a cornerstone to a Canadian person’s retirement. It provides an income for life, which you and your employer have paid for over the course of your entire working life. However, deciding when to apply for CPP benefits remains one of the biggest and hardest questions to answer about retirement planning.

    The earliest age that a Canadian can apply for CPP benefits is 60 years old. However, taking CPP before the age of 65 will result in a reduction of your monthly benefit payment by approximately 0.5% for every month that you are under 65. Thus, someone who retires at age 60 will see a 30% reduction in their monthly payment. Beginning in 2016, if you begin to take early CPP benefits, then your pension payment will be reduced by 0.6% every month you are under the age of 65. However, if you decide to delay your retirement past the age of 65, you will receive an increased benefit of approximately 0.7% per month. This means you can receive a maximum of 42% extra CPP benefit (applications after age 70 provide no additional benefit).

    CPP Annual Benefits
    Age at ApplicationOld CPP Rules (Pre 2011)New CPP Rules (Post 2016)

    * “Pensions and You” by Maureen Glenn, March 19, 2014, ©2000-2014 by Rogers Publishing Ltd.

    Even though a reduced CPP benefit applies to early CPP payments, there are some reasons where taking CPP early is beneficial:

    1: Poor health

    If you are in your late 50s and you are already experiencing poor health, then taking CPP early will be beneficial to your financial well-being. Even though there will be a reduced rate, your health might stop you from working as much and/or you might require additional income for increased medical expenses.

    2: Guaranteed Income Supplement (GIS)

    If you are a low-income Canadian then you might be eligible to collect GIS beginning at age 65. However, like most social assistance programs, every dollar of income you earn can result in a steep clawback to your social assistance payment. By taking a reduced CPP benefit, you might be able to keep more of your GIS benefit.

    3: Less time spent working

    CPP is calculated by averaging your contributions from the age of 18 until the time you actually start to take the CPP benefit. CPP allows you to drop your 15% lowest earning years from the benefit calculation. This translates to seven years if you retire at age 65. If you were unable to work due to a severe disability or if you took time away from work to raise children then you are potentially able to drop even more of your lower income years from the benefit calculation. However, if you retire at age 60, but don’t start taking the CPP benefit until age 65 you have now added five more no income years to the calculation reducing your average pensionable earnings.

    4: Still working after 60?

    After January 1, 2012, a Canadian could still continue to work and begin to collect CPP benefits as soon as they turned 60 years old. There is one catch to this idea: you will continue to pay into CPP. However, this is not such a bad thing as continuing to pay into CPP helps to increase your future benefit. In addition to the reasons to start taking CPP early, there are also reasons to begin taking your CPP entitlement at 65 or later.

    5: Life expectancy

    If you have a longer than average life expectancy, it does not make sense to take CPP early. Financially speaking, the longer you live, the longer you will require an income for. By delaying the start of your CPP benefits, you will draw a larger benefit over a longer period of time then if you began taking your CPP early.

    6: You earn a good income

    If your retirement plan is to continue working and earning a good income until at least the age of 65, then why take your pension early? Just because you can start taking CPP early, doesn’t mean that you need to. By delaying the start of your CPP payments, you are not only keeping your predicted CPP payment intact, but you are also helping to keep yourself in a lower tax bracket. Delaying payments can also be beneficial if you collect a considerable employer pension for the previously mentioned reasons. Just because you retire doesn’t mean you get to stop paying taxes, so why increase your income if you don’t have to?

    Trying to decide when to take your CPP benefit might be one of the hardest retirement decisions you will ever have to make. The answer is a balancing act between how long you hope to live for and how much you think retirement will cost you. Unfortunately, there is no one-size fit all answer and the only right answer is the one that is right for you. At the end of the day, you worked hard to earn your CPP benefits, so you might as well enjoy them!

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