The Canada Pension Plan (CPP) provides a number of benefits, the most significant of which is the retirement pension that forms an integral part of most Canadians’ financial plans for retirement. The Quebec Pension Plan (QPP) provides parallel benefits for Quebec residents. Every contributor to these government-sponsored pension plans will eventually need to make important decisions about when to begin receiving these valuable benefits.
Individuals in receipt of eligible pension income can allocate or split up to 50% of the income with their spouse or common-law partner, and the allocated income is reported as the spouse’s taxable income. This allows the shifting of income from a higher-income spouse to a lower-income spouse, enabling the couple to reduce their combined income tax liability and increase cash flow during retirement.
The introduction of the Tax-Free Savings Account (TFSA) in 2009 presented the most important change to the way Canadians save money. RRSPs were launched in the 1950s. But the big question on many people’s minds is whether they should contribute to a Tax-Free Savings Account (TFSA), the tried-and-tested RRSP, or both?
A Registered Retirement Savings Plan (RRSP) is a great way to invest for retirement and reduce income taxes. But, like most good things, it must come to an end. You are required by law to wind-down your RRSP by the end of the year in which you turn age 71. In reality, most people start drawing on their RRSPs for retirement income before then.
