CPP and OAS

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
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patriot1
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Re: CPP and OAS

Post by patriot1 »

kombat wrote: Again, there's no actual compounding with a conventional mortgage in Canada. Interest is never charged on interest, which is the definition of compounding.
It is the principal payments which in fact compound, which is the reason the mortgage eventually gets paid off. Conceptually you can consider the mortgage to be two bonds - one simple interest bond which represents the original amount from the lender, and a compounding bond which represents the principal payments from the borrower. The mortgage is paid off when the value of the former equals the latter.
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Pickles
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Re: CPP and OAS

Post by Pickles »

marty123 wrote: Pushing young people to invest in retirement accounts aggressively borders on financial porn, and mostly benefits financial advisors and fund companies. The key is to strive to increase one's networth. Whether it be through debt repayment or investments is a matter of asset allocation.
Excellent post, marty123. I agree 100%, although I'm aware that some young people will not redirect their money wisely, if not forced to. Still, to force others to save more in their RRSPs because of these spendthrifts is not right.
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Re: CPP and OAS

Post by Flights of Fancy »

marty123 wrote:In an attempt to fix a grasshopper's future problem, we're taking away an ant's freedom and it's flexibility to manage its own money.
I love this. Speaking as a savvy young ant. 8)
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Re: CPP and OAS

Post by bwalter »

Flights of Fancy wrote:
marty123 wrote:In an attempt to fix a grasshopper's future problem, we're taking away an ant's freedom and it's flexibility to manage its own money.
I love this. Speaking as a savvy young ant. 8)
I agree, though maybe it's better for the ant to lose some freedom and flexibility instead of being forced to redistribute wealth to the grasshopper later (through programs like GIS which ants inevitably pay for via taxes.)
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Shakespeare
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Re: CPP and OAS

Post by Shakespeare »

There are more grasshoppers than ants, so any compulsory program will tend to redistribute the ants' load.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
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Flights of Fancy
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Re: CPP and OAS

Post by Flights of Fancy »

I can control my tax payable much more readily than I can control mandatory contributions to CPP.
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Shakespeare
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Re: CPP and OAS

Post by Shakespeare »

You can - but the grasshoppers don't. Extracting more money from grasshoppers is a benefit to ants.

Unless you want to let the grasshoppers starve, of course - an idea which is sometimes tempting. :wink:
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Flights of Fancy
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Re: CPP and OAS

Post by Flights of Fancy »

Shakespeare wrote:Extracting more money from grasshoppers is a benefit to ants.
I know. My objection to an increase in CPP is probably perverse. I (would) stand to receive a net benefit.

What I do NOT like is the framing around this issue as something that "helps" people who would otherwise be too stupid or foolhardy to do this themselves. The net beneficiaries of an increase to (unisex) longevity-protected income are people who live longer than average.

I am in that group, if for no other reason than that I am female (and CPP imposes unisex contribution rates) - but I'm in that group for other reasons (genetic and socio-economic) as well.

The upshot of an increase in CPP would arguably be a wealth transfer from the whole (working) population to the longest-lived among us, and you can (to some extent) segment the longest-lived out based on socioeconomic factors. But I don't ever, except here, see the argument framed that way. :x
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Re: CPP and OAS

Post by active »

I have a question:

My CPP earnings and distributions statement shows for 2009 $0.00 contributions with the note "B" Earnings below basic exemption, the minimum amount I must earn to have to contribute to the CPP.

That is correct as filed, as in 2009 I paid myself dividends rather than a big salary.

Is there a way to make a voluntary contribution to CPP in case of a low income and could I still do this for 2009?

(Why would I want that? My eligibility for a start of a German pension at a certain age is depending on how many months I contributed to the pension system and for eligibility (but not for the amount payable) the contribution months in Germany and Canada all added together.)
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adrian2
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Re: CPP and OAS

Post by adrian2 »

active wrote:That is correct as filed, as in 2009 I paid myself dividends rather than a big salary.

Is there a way to make a voluntary contribution to CPP in case of a low income and could I still do this for 2009?
You could file a T1ADJ to amend last year's tax return and award yourself a small business income from your corporation, just enough to bump you over the $3.5k limit -- make sure it's at least $3,521 so that the extra $21 x 4.9% brings your personal CPP contribution over $1, times two for the self-employed part. CPP's systems don't automatically handle fractions of a dollar.

You will pay some relatively small penalties for insufficient taxes remitted by the April 30 deadline, you'll have to weigh if it's worth it.
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Re: CPP and OAS

Post by active »

Adrian,

unfortunately this does not work anymore as personal taxes are allocated on when the funds are actually received and I can no longer create a cash flow from the company to me to be documented for 2009. If I would charge the company for consulting, maybe, but then there is the GST issue. That all would create more trouble than benefit.

I should have thought about this last year. :(
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Re: CPP and OAS

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active wrote:unfortunately this does not work anymore as personal taxes are allocated on when the funds are actually received and I can no longer create a cash flow from the company to me to be documented for 2009.
One possibility: issue from the company a promissory note dated December 2009, switch it for a cheque now.

I doubt CRA will pursue too deeply a situation where someone volunteers to pay more. In any case, it's a few grand and the only debatable part is timing -- you're not trying to evade taxes, just to prepay them. You be the judge if it's worth it.
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Shakespeare
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Re: CPP and OAS

Post by Shakespeare »

Small CPP rise would solve Samaritan's Dilemma
But now, in advance of the next meeting of finance ministers Dec. 20, Duncan has outlined three possible variations of an enhanced CPP. None proposes to increase the percentage of average earnings replaced in retirement to more than 35 per cent.

The most ambitious of the three proposals would also increase the cap on the income subject to CPP contributions to about $70,800, or 1.5 times higher than the limit of $47,200 for 2010.
I don't know if agreement is possible given Alberta's opposition [which I think is wrong-headed].
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Re: CPP and OAS

Post by AltaRed »

The key issue is the increase in employer's contribution. Why should employers have to pay more to compensate for employee incompetence, or unwillingness, to save for their own retirements. If the increase came strictly (or signficantly disproportionately) from the employee, I doubt Alberta would have a problem with it.
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Shakespeare
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Re: CPP and OAS

Post by Shakespeare »

Most employees would view increased forced deductions as a tax, and would oppose it. Putting it on the employer is less efficient, but politically more palatable. In the end, the money comes from the same pocket.
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AltaRed
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Re: CPP and OAS

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Shakespeare wrote:In the end, the money comes from the same pocket.
How so? As a shareholder of companies, I would be pissed funding more of their employees' pensions. Granted employers get tax reductions for those contributions and I pay less income tax due to reduced dividends and cap gains from stock, but why should I foot that bill?
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Shakespeare
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Re: CPP and OAS

Post by Shakespeare »

How so?
Increasing payroll taxes causes raised prices which the consumer pays.

The consumer and taxpayer are the same person.
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Re: CPP and OAS

Post by AltaRed »

I don't buy that entirely with the global marketplace. Prices can only be raised to competitive levels with imports. Canadian companies and their shareholders suffer with excessive payroll burdens compared to their global competitors.

Commodities, i.e. resource companies, must be competitive at the margin. Given the number of resource companies in Alberta and local/national shareholders, they will all suffer just because some misguided clowns see fit to move the 'retirement planning' burden on to employers. I don't buy into it completely.
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Re: CPP and OAS

Post by NOVICE99 »

My CPP pensionable earnings in 2008 were $44900 and in 2009 $46300. When I got an estimate of my monthly CPP last year, it was higher than this year even though I've paid another year. My salary has been relatively stable for the past 15 years. Why would the CPP estimate be lower, does anyone know?
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Re: CPP and OAS

Post by kcowan »

NOVICE99 wrote:Why would the CPP estimate be lower, does anyone know?
The main (only?) reason would be a lower CPI assumption?
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Re: CPP and OAS

Post by brucecohen »

kcowan wrote:
NOVICE99 wrote:Why would the CPP estimate be lower, does anyone know?
The main (only?) reason would be a lower CPI assumption?
I don't think that would affect it. IIRC the estimate states it's what you would get if you were now 65. So that's just the starting amount and there's no application of CPI since it's in a one-year time frame. I suggest that Novice get a printout of his contributions and verify them against his tax returns. The print is available online from Service Canada.
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Re: CPP and OAS

Post by NOVICE99 »

It doesn't look like my 2010 CPP contributions have been recorded on the Service Canada site. Is this normal?

Contribution Pensionable Earnings
2008 $2,049.30 $44,900.00 M
2009 $2,118.60 $46,300.00 M
2010 $0.00 $0.00

Maybe that's why it's showing a lower monthly CPP payout estimate? Or not?
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Re: CPP and OAS

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NOVICE99 wrote:It doesn't look like my 2010 CPP contributions have been recorded on the Service Canada site. Is this normal?
I expect it is normal. Until your employer files a T4 slip for the calendar year, Service Canada has no way of knowing how much CPP has been remitted on your behalf.
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Re: CPP and OAS

Post by Jo Anne »

DavidR wrote:
NOVICE99 wrote:It doesn't look like my 2010 CPP contributions have been recorded on the Service Canada site. Is this normal?
I expect it is normal. Until your employer files a T4 slip for the calendar year, Service Canada has no way of knowing how much CPP has been remitted on your behalf.
David is absolutely correct.

The only time Service Canada is notified of the tax and CPP amounts for individuals is when employers file a T4 summary for the previous year. That will usually be in February.
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Re: CPP and OAS

Post by adrian2 »

Jo Anne wrote:The only time Service Canada is notified of the tax and CPP amounts for individuals is when employers file a T4 summary for the previous year. That will usually be in February.
The other time is when self-employed people file their taxes by April 30. :)
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