Retirement Income and Age-Related Credits

Personal tax returns include credits for children, spouses, and even seniors. Many of these credits are income-tested in that the credit is reduced or lost as income increases. This is very relevant to those 65 and older. We are encouraged to save for retirement, and many use RRSPs for retirement planning. However, upon reaching 69, there are mandatory withdrawals that may result in higher income levels than required and could cause the loss of income-tested credits and benefits.


The age credit, a non-refundable credit available to those over 65, is gradually lost at net income levels above $35,466 and completely lost when net income exceeds $82,352. The credit works out to a tax savings of $1,350. This bumps the overall effective tax rate on $82,352 from 26.6% to 28.2%.


The OAS pension is another concern. The annual maximum of $6,786 (2015) is reduced by income above $82,352 by a similar rate of 15%. Thus, once you have lost the age credit, CRA continues to grind away at your OAS. However, unlike the age credit, which is a 1reduction in a credit, the OAS clawback is a dollar-for-dollar loss.


So, how does the tax system allow us to tax plan? If you are able to reduce your RRSP pool prior to the mandatory age of withdrawal, you can reduce the minimum annual withdrawals for future years and thus the loss of credits and OAS benefit. If you were incorporated, corporate savings are more flexible and you can plan the income level each year so as to minimize credit loss resulting from higher income levels.


While our tax system bases tax rates on income levels, with higher-income individuals bearing a higher burden of tax, it is unfair to encourage Canadians to save for retirement only to punish them for being responsible retirement planners. Some simple planning techniques, such as early RRSP withdrawals and corporate investment, might end up minimizing some of the negative effects of good saving habits.

Filed in:

Author

Categories

Privacy Policy

Bluenose Accounting (the “Firm”) is committed to maintaining the confidentiality, security and accuracy of your personal information. The Firm collects uses and discloses personal information related to its clients and employees to the extent required to provide requested services for those clients, to fulfill its professional responsibilities and operate its business. We are committed to protecting the privacy of information in our possession and control. To that end, the Firm has established a Privacy Policy to protect the privacy rights of its clients, employees and others. The Firm’s Privacy policy sets out principals and guidelines it follows in order to meet its privacy commitments and complying with provincial and federal privacy legislation. This policy relates to the collection, use and disclosure of personal information by the firm, its partners and employees.

What is Personal Information?

The firm defines personal information as any information that the firm receives as a part of servicing individuals, or indirectly, through clients that are organized as corporations, not-for profit organizations, charities or other like organizations in addition to information related to its employees and partners. Such information would include, but is not limited to, names, addresses, telephone number, age, sex, marital status, identifying numbers, education status and medical history. A more detailed definition can be found in the Freedom of Information and Protection of Privacy Act of Nova Scotia. The Firm only collects information required to provide the services requested and agreed upon. Such information is contained as required within filings with government agencies or as part of its working papers as required by professional standards, rules of professional conduct and regulation.

The Firm’s Commitment

The Firm has established and put into place policies and procedures designed to protect personal information. The firm has communicated to its partners and employees its policies with respect to privacy and has established responsibilities for all individuals with access to private information. The firm has designated Anthony Fielding Ph.D., CA (anthony@bluenoseaccounting.com) as its Privacy officer.

Consent

Information provided to us, including that collected from our website, is used solely for the purpose of the service(s) indicated and is often, but not always, set out in its engagement letter. Should you advise us at any time that you no longer consent to the use of the personal information that you have provided to us, we will take your information off our database.

Safeguards

The Firm protects the privacy of personal information in its possession by using security safeguards appropriate to the sensitivity of the information. Such safeguards include physical restriction (locked premises and security systems) and electronic protection (password protection and encryption).

Legal Disclaimer

Although we make every effort to preserve user privacy, we may need to disclose personal information when required by law when we have a good-faith belief that such action is necessary to comply with a current judicial proceeding, a court order or legal process.

Other Use of Your Information

Except as set out in this Privacy Policy, we do not make any other use of the personal information which you provide to us unless you have consented to its use for any other purpose. We do not sell or disclose your personal information to anyone, except as required by law.

Website

In using our website, you consent to the collection, use and disclosure of your personal information in accordance with this Privacy Policy.

×

Terms of Use

Terms of Use

The use of this web site is governed by the terms and conditions as set out below. By using this web site, you have agreed to be bound by these terms.

Copyright

The information contained within this site, including the underlying HTML, text, images and any other content is the property of Bluenose Accounting (the “Firm”). Any reproduction or redistribution of content of this site without the express written permission of the Firm is strictly forbidden.

Disclaimer

The information provided in this site is free of charge and is for information purposes only. Such information should not be relied upon or used as a basis for decisions. The Firm has made all efforts to maintain the accuracy of the content of this web site. Information provided on this web site is provided without any warranties of any kind. The Firm assumes no responsibility or liability for damages that may arise from the use of this site or of any information contained within.

External Links

The Firm may provide external links to third party sites and some content provided on this site may actually be from third party sites. The Firm assumes no liability for the accuracy of third party information contained within this site or in those reached through links contained within this site. Any links are provided for information purposes only and are not to be construed as an endorsement by the Firm. The Firm has not reviewed or otherwise attempted to verify the accuracy of information contained within such sites.

The Firm assumes no responsibility or liability for damages that may arise from the use of these links including any computer security issues such as, but not limited to, viruses, Trojan horses or other disruptive code which may be downloaded or transferred from such linked sites.

Acknowledgement

By using this site, you are agreeing to the terms and conditions as set out above. Any use of information contained within this site is not to be construed as professional advice and the use of such information does not relieve you from applying the standard of care and due diligence relevant to the use of such information contained in this web site. You are solely responsible for verifying the accuracy and reliability of all information contained within this web site.

×