It used to be that when most people retired they had no intention of doing any more work that was for income purposes only. This was their time to shine and enjoy all the hard years of work that they had committed to. Now there are many that retire from one job and go right back into another. This causes them some confusion as to what does this do to their government pensions?
Working and Receiving Pensions
Many think that they cannot collect their pensions until they turn sixty-five. So if they retire at sixty they have no money coming in from the government. This is not true. As an individual can apply for their Canada Pension Plan (CPP) one they turn 60. They can still be working and collecting this but they will need to keep contributing to their CPP. If they don’t want to do this they can fill out a form for the election to stop contributions. Once an individual becomes 70, they are no longer required to contribute nor are they allowed to.
Some people who are still working feel they haven’t contributed enough to their CPP so they want to keep doing so after the age of 65 which they can do. But, it they have reached their max. then they have to start receiving benefits from their CPP after they turn 65 so they could keep contributing to the plan.
Old Age Security is different. This can not be received until the age of 65, but there is an option not to collect from it until the age of 70.
Deferring Payments
Some individuals at the age of 65 don’t have a need for their pension income and prefer to wait until their seventy. By doing this they will be able to increase their pension amounts when they do start to receive it. For example, deferring the CPP until 70 increases it by 8.4% per year. The OAS benefit increase is 7.2% per year after the age of 65.
Flexibility
Some individuals decide to that take one pension and defer the other, which is a choice that they have.
Then for those who have RRSPs, they have some options for using some of this money after the age of 65.
Making A Plan
There are a lot of changes that take place during the retirement years. The finances is one of them. Every individual has to utilize their pensions the best way they see fit, in regards to whether they want to receive some of it before the age of seventy, or all of it. It can make a big difference once past seventy as to what is being received. However, some may want to take their pension money early and invest it. Which is another option.
Taxes
One thing that does not change when one retires is the responsibility for filing taxes. The figures may change but they still have to be filed. It is a good idea to have an accountant complete your taxes and at the same time gain some advice as to what is your best options regarding your pensions especially if you keep on working after age 65. Give me a call, Sam Seidman, and I would be more than happy to assist you with your tax matters and advise you on your retirement options when it comes to your finances.
