The majority of Canadians work hard to accumulate a retirement fund and many are averse to exposing savings to unnecessary market risk after they retire.
In today’s prolonged low interest rate environment, immediate annuities are often dismissed or overlooked as a viable vehicle for providing retirement income. Perhaps they shouldn’t be.
An annuity is an investment that provides a guaranteed income stream for a set period of time or for the lifetime of the annuitant. While annuities may not be for everyone, for those trying to find a way to guarantee income in retirement Immediate Annuities may be the answer.
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The new rules governing CPP were introduced in 2012 and they take full effect in 2016. The earliest you can take your CPP Pension is age 60, the latest is 70. The standard question regarding CPP remains the same – should I take it early or wait?
While you can elect to start receiving CPP at age 60, the discount rate under the new rules has increased. Starting in 2016, your CPP income will be reduced by 0.6% each month you receive your benefit prior to age 65. In other words, electing to take your CPP at age 60 will provide an income of 36% less than if you waited until age 65.
CPP benefits may also be delayed until age 70 so conversely, as of 2016, delaying your CPP benefits after age 65 will result in an increased income of 0.7% for each month of deferral. At age 70, the retiree would have additional monthly income of 42% over that what he or she would have had at 65 and approximately 120% more than taking the benefit at age 60. The question now becomes, “how long do you think you will live?” Read more
One of the most common investment questions Canadians ask themselves today is, “Which is better, TFSA or RRSP”?
Here’s the good news – it doesn’t have to be an either or choice. Why not do both? Below are the features of both plans to help you understand the differences.
Tax Free Savings Account (TFSA)
- Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income. There is no maximum age for contribution.
- Maximum contribution is $5,500 per year starting in 2013 ($5,000 per year for the period of 2009-2012). In 2015, the maximum contribution was increased to $10,000 by the Harper government. This increase may be short lived as the Liberals have stated they will reduce the maximum back to the previous limit. In the meantime, you can take advantage of the $10,000 limit. The contribution must be made by December 31st.