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Retirement Planning with Grant Hicks
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 Grant
Hicks, C.I.M., FCSI is a professional speaker, co-author and
a Retirement Planning Specialist with Manulife Securities. and Hicks Financial Inc. A leader in
the financial industry, Grant has been helping Vancouver
Island residents plan and create their retirement lifestyles
since 1989. |
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New Canada Pension Plan Rules
If you are planning retirement in the
next few years, then you better be aware of the new
rules! Canadians need to be aware of these changes
because it affects everyone in the work world
especially those planning to retire around 2011.
1. Elimination of the stop working rule.
Currently In order to collect CPP, you must be at
least 60 years of age and have stopped working or
reduce your earnings for 2 months. This is to remove
the requirement to stop working and allow any
Canadian to elect CPP as early as age 60. It just
makes sense to eliminate the rule.
2. Increase the reduction of early
CPP. Currently, those that take CPP early can do
so but at a reduced rate of 0.5% for every month
prior to your 65th birthday. For example at the age
of 60, the reduction would be 30%, which is 0.5% x
60 months. Under the proposed changes, the reduction
would increase to 0.6% for every month prior to your
65th birthday, which would result in a 36%
reduction.
Obviously, this change is meant to
deter people from taking CPP early, which under the
current rules make a lot of sense to do so. Even
with the new reduction rate of 0.6%, the breakeven
calculation suggests that taking CPP early probably
still makes the most sense most of the time. The
breakeven point moves from age 77 to age 74.
3. Increase the enhancement for
collecting CPP after age 65. In order to try and
entice people to delay taking CPP early, not only
are they going to apply a bigger reduction to taking
it early, the plan calls for an enhancement of the
benefit for those planning to delay CPP. The
enhancement would be 0.7% for every month after your
65th birthday. In other words if you waited till 70
to collect CPP, you would get a 42% increase (0.7% x
60 months).
4. Contributions to CPP while
working. Currently, those who collect CPP and
then return to work do not have to pay into CPP.
Once you collect a CPP benefit you never have to
contribute into the CPP plan again.
With the new changes, not only will
you be able to collect CPP while you are working but
you will have to continue to make contributions into
CPP as long as you are working under the age of 65.
These contributions will result in increased
retirement benefits, including persons already
receiving the maximum pension amounts. After the age
of 65 contributions into CPP will be optional.
5. Increase the low earning drop
out. This change probably has the greatest
universal affect on Canadians.
Currently, Canadians who retire at 65
can drop out 7 of their low earning years out of the
total 47 years (from age 18 to 65) you were eligible
to contribute to CPP.
This drop out allows Canadians to
remove years where they went to school or took time
off or were unemployed. Under the new rules, the
proposal is to increase the drop out period. I think
people who are turning 60 in the next couple of
years before the implementation of these new rules
will have to look really hard at whether it is to
their advantage to take CPP before the new rules and
get grandfathered under the old rules or wait and
take CPP under the new proposed rules.
Prepared by: Grant W. Hicks C.I.M., FCSI, Retirement Planning Specialist with Manulife Securities, Parksville. Information provided is not a solicitation and although obtained from sources considered reliable, is not guaranteed.
The views and opinions contained in this article are those of Grant W. Hicks, not Manulife Securities.
Comments or questions Grant can be reached at
954-0247 or 1-866-954-0247, email:
grant@ghicks.com
web:
www.ghicks.com
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| Copyright G. Hicks. All
Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed without the permission of the author. |
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