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Can you simplify RRSP, OAS, and Pension rules please?
February 1, 2021
11:01 am
Save2Retire@55
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Hello, I might sound an idiot but the more I read the more confused I get about the rules. Here are some questions:

1. Is the Minimum pension paid to anyone as long as they contributed to my RRSP payment during the years? Let's say someone comes to Canada and they are 57 years old. They work for 2 months. Contribute to pension twice and stop working. Will they get the Min pension payment?

2. I think we discussed this before but if I plan to retire somewhere cheaper (and warmer) than Canada. Will I still get pension payments? And I understand they cut a big chunk before when withdrawing RRSP, is it the same case when paying pension? (Some portion will be returned after Income Tax) The question is, does it matter if you are a resident of Canada or not for Tax purposes (Which I assume is staying in Canada for min 6 months) to receive the pension you contributed to for 25-35 years?

3. And me being a QC resident isn't helping clearing up my confusion. More rules on Revenue QC when it comes to pension. Maybe a retired QC person around to tell me their experience.

4. I am planning to stop working full time when I have $1M in saving (Including RRSP, TFSA, and non-registered) (hopefully when I am 55 unless Market crashes or I lose job for years for whatever reason) but I'd like to know what I need to do to make it happen. I don't want to use the pension before 65 unless I am sick. And I understand nobody has a crystal ball but your past experiences will help making a wise decision. Basically I need to rely on my savings (Dividends, RRSP withdrawal) before 65. Then after 65 it will be pension in addition to my saving and RRSP.

Well that's what I hope to achieve anyway but nobody knows the future.

Thank you as ALWAYS 🙂

February 1, 2021
11:43 am
Bill
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Re #1, you need to clarify, what pension are you talking about when you refer to "minimum pension"? (And what's it got to do with your RRSP?)

Re #2, as far as I know you can live anywhere and still receive pension payments, including QPP, you've qualified for.

February 1, 2021
12:48 pm
Alexandre
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CPP: The Canada Pension Plan (CPP) retirement pension is a monthly, taxable benefit that replaces part of your income when you retire. If you qualify, you’ll receive the CPP retirement pension for the rest of your life. To qualify you must have made at least one valid contribution to the CPP.

OAS: Your employment history is not a factor in determining eligibility. You can receive the Old Age Security (OAS) pension even if you have never worked.

GIS: The Guaranteed Income Supplement (GIS) is a monthly payment you can get if (among other things) you live in Canada.
The Supplement is based on income and is available to low-income Old Age Security pensioners.
----------------------------------

This would be the place to start: Information on the Canada Pension Plan, Old Age Security pension and related benefits, the Canadian retirement income calculator and retirement planning.

February 1, 2021
4:10 pm
Save2Retire@55
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Thank you. I found my answer. tawcan.com is a great blog.

February 1, 2021
5:55 pm
Loonie
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I have no personal experience with QPP or with ex-pat provisions.

I'm pretty sure you can't get OAS or GIS if you leave the country, but should check.

CPP pension is based on contributions, so, if you only contributed a couple of months, it's not going to be worth hardly anything.

I don't believe there is a minimum CPP payout, but there is a maximum. There is a minimum RIF payout, however, as a percentage of the asset. Is that what you meant? I am confused by your use of the word "pension", not sure what it refers to.

The question of whether you remain a Canadian resident is an important one as it affects the answers to many of your questions. I know that it can be somewhat difficult to convince the government that you are no longer a resident. You have to close all your Canadian bank accounts and credit cards, I believe, and it could affect whether your RSP, RIF, TFSA remain open. But I don't know enough about this to give reliable answers.

When establishing your savings targets, be sure to add an estimate of what you will owe on your RSP in taxes in future, as that is a liability against your assets that you will need to cover.

If I were doing what you propose, I would not want to give up Canadian residency. The world is too volatile and likely to become moreso in my opinion. I'd want to know I had some place to come back to on short notice, however humble, and that the various accounts I needed were in place, plus health coverage. And weren't you the guy who wanted your children to live close to you when they grew up??

February 1, 2021
6:30 pm
Bill
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You can get OAS and CPP if you reside abroad when you collect them, not GIS as have to be Cdn resident to get it.

February 1, 2021
6:34 pm
Norman1
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Don't need to close bank accounts, credit cards, and so on to become non-resident.

Those are just some of the factors CRA considers. A former neighbour still has his home in Canada, RRSP, bank accounts, credit cards, and provincial drivers license. CRA doesn't have a problem with his non-residency status.

Other circumstance trump all those things. Former home is now a rental. Management company hired to take care of the rental.

He and his wife live and work outside of Canada for years now. Same with the kids. They go to school in the country they live.

Canadian bank account facilitate collecting of Canadian rent cheques and paying things like property taxes and Canadian income taxes.

Canadian credit card facilitates spending of those Canadian dollars.

Canadian drivers license facilitates driving around when he visits Canada every few years.

February 1, 2021
10:23 pm
Loonie
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These may be helpful, but i think it's only a start.

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html

The latter page in particular makes it clear that holding Canadian bank accounts, drivers' licence, etc may be seen as signs that you are a Canadian resident.
Ultimately it will be up to CRA. If you and they differ in opinion as to whether you are a Canadian resident, you might have to take it to tax court. Generally, CRA rules.

I would not rely on the experience of Norman's neighbour to determine your situation. While it may well be true, it is not definitive; it is anecdotal. Others have had different experiences.
A key factor appears to be whether you have a home here that you could move back into readily. If you have one, you are considered a Canadian resident. I can verify from personal experience that I found this to be true.

I think, on further reflection, that Bill is correct about the OAS. It dose have a residency requirement in that you must have lived in Canada a certain number of years over age 18 in order to qualify for it. However, it makes no sense to me (and a lot of other people) for us to be giving OAS to people who don't live here as it is paid for out of the annual federal budget, not from a pension plan to which you have contributed, and it is related to the cost of living in Canada, not Barbados or Italy or wherever. I think it's likely that this practice will end at some point before you retire, and indeed OAS itself is likely to be overhauled completely. If I were planning for 20 -50 years hence, I would not include OAS as income I anticipated receiving. I probably won't be here in 20 years, so it's less of an issue, but, even so, I do not assume OAS will even be here for the rest of my life.

If you can tolerate a bit of unsolicited advice, I would suggest you assume you may have to work longer than you anticipate. Lots of things are going to change in the coming years and you will be adjusting your plans from time to time. Keep in mind ways you could earn additional income later if needed. Cultivate contacts in your industry with this in mind. Don't think in terms of finality at 55.

February 2, 2021
4:46 am
Alexandre
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GIS specifically - one must reside in Canada to continue to be eligible. That is different from CPP and OAS.

If you plan to leave Canada for more than 6 months, you must contact us to avoid an overpayment.

Service Canada compares information with the Canada Border Services Agency. If you leave Canada for more than 6 months while collecting the Guaranteed Income Supplement, we’ll determine if you’re eligible to those payments. If not, we’ll calculate how much we overpaid you, and you will then have to repay that amount.

Note: You could be fined for giving false, misleading, or purposely omitted information.

February 2, 2021
6:48 am
Bill
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Here's the link re determining residency:
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html

Keeping a readily available home here is definitely key. But, as we know, having rules is just one thing. I happen to know of a few guys who are tax haven residents who regularly spend maybe 4 months of the year here, in their homes (likely owned by numbered companies) and CRA hasn't come knocking so I wonder about the level of enforcement, despite CRA's regular use of the media to soothe the plebes that they're cracking down on this stuff.

February 3, 2021
10:46 am
Save2Retire@55
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Thank you, All.

Actually the below quoted is good news. I think it will be a snowbird kind of arrangements but not in the US / Mexico or the Caribbean. I like to explore so will most probably be a different country which is much cheaper than Canada every year from Nov to April. Or I hope I can manage depends on how the kids situation ends up. If all goes as planned (which it barely does, Haha), by the time I am 55, they are done their University (Undergrad at least if they decided to) with couple years of working experience. So our role as parents will be limited to the other 6 months in Canada!

But again, who knows what happens in 15-20 years.

February 3, 2021
11:08 am
Norman1
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Bill said
Here's the link re determining residency:
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/determining-your-residency-status.html

Keeping a readily available home here is definitely key. But, as we know, having rules is just one thing. I happen to know of a few guys who are tax haven residents who regularly spend maybe 4 months of the year here, in their homes (likely owned by numbered companies) and CRA hasn't come knocking …

Having a place to stay in Canada is just one of the factors examined.

Someone is not going to be found a resident of Canada just for keeping a "dumpy" $1 million house in Toronto that they and their family return to for a few months each year in the summer. For the rest of the year, they live in a $50 million house in California where the kids also go to school and the parents have substantial careers.

That's not very different from people in Canada having a place in Florida where they spend the winter months each year. That winter home and a US bank account to pay US property taxes and other sundry expenses won't make them US residents for tax purposes either.

As that CRA web page clearly says, "all the relevant facts" must be considered and not just residential ties:

To determine residence status, all of the relevant facts in each case must be considered, including residential ties with Canada and length of time, object, intent, and continuity while living inside and outside Canada.

February 3, 2021
11:46 am
Bill
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The guys I've seen, Norman1, have way more ties to Canada than in your examples, I'm not going to get into details. They did things right when they "left" Canada in terms of satisfying CRA, and were more diligent for the first few years. But my overall impression watching them now is that if you provide the convincing documentation to CRA when you set it up, there's no follow-up over the following years to see what you're up to later. The usual, lots of rules, regulations and regulators employed, next to no enforcement. Until a vengeful ex-spouse, neighbour, etc rats on them, then CRA MIGHT get on it (and publicize the heck out of it to indicate they're out there looking).

February 3, 2021
11:50 am
Bill
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Save2Retire@55, you modern parents! I didn't cost my parents a dime after age 18, I don't think they ever really knew exactly what it was I did to make my way in the world, and we both wouldn't have had it any other way.

February 3, 2021
1:16 pm
Save2Retire@55
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Bill said
Save2Retire@55, you modern parents! I didn't cost my parents a dime after age 18, I don't think they ever really knew exactly what it was I did to make my way in the world, and we both wouldn't have had it any other way.  

I agree with the independent part but I think it is important to support them financially so they gain their independency faster and in a more reliable way plus Education and Properties are much more expensive nowadays than decades ago. I honestly, if have enough wealth by then, wouldn't mind giving them down payment to encourage them on paying mortgage rather than wasting their money. Then they can pay me back whenever they can (or not as long as the money isn't needed).
It all depends on how much I have by then of course.

February 3, 2021
3:00 pm
James
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@save2retire@55:

You are definitely not an idiot (or if you're an idiot, then I am too!). These are very intelligent questions. I was curious about #1 as well and could not find an answer after much research. They say you can go to your Service Canada account and get an estimate of your pension, but I was curious about what you asked which is if you are taking the pension at 65, and have only contributed, say $100 from a few paycheques, what is the minimum you will receive? They give a maximum and an average, but I couldn't find the minimum. I realize it also takes into account years of low income, but I'm talking about a very minimal contribution - only a few paycheques as you mention. Did you find this answer?

For #2, I found this interesting as well. I knew about the 6 month rule for residency and collecting GIS but the OAS and CPP I had heard conflicting information. Also, remember that for OHIP, there are a separate set of requirements (if you still want to keep that). I've listed them below FYI:

Away for more than seven months
If you plan to be outside Canada for more than seven months in any 12-month period you can keep your OHIP coverage for up to two years if you:

have a valid health card
make Ontario your primary home
will be in Ontario for at least 153 days a year in each of the two years immediately before you leave the country
Before you leave, take the following items to the nearest ServiceOntario centre to make sure your OHIP coverage stays active:

your health card
proof of residency (e.g. mortgage, lease or rental agreement, property tax bill, valid driver’s licence)

Save2Retire@55 said
Hello, I might sound an idiot but the more I read the more confused I get about the rules. Here are some questions:

1. Is the Minimum pension paid to anyone as long as they contributed to my RRSP payment during the years? Let's say someone comes to Canada and they are 57 years old. They work for 2 months. Contribute to pension twice and stop working. Will they get the Min pension payment?

2. I think we discussed this before but if I plan to retire somewhere cheaper (and warmer) than Canada. Will I still get pension payments? And I understand they cut a big chunk before when withdrawing RRSP, is it the same case when paying pension? (Some portion will be returned after Income Tax) The question is, does it matter if you are a resident of Canada or not for Tax purposes (Which I assume is staying in Canada for min 6 months) to receive the pension you contributed to for 25-35 years?
 

February 3, 2021
3:27 pm
pooreva
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James said
@save2retire@55:
They give a maximum and an average, but I couldn't find the minimum. I realize it also takes into account years of low income, but I'm talking about a very minimal contribution - only a few paycheques as you mention. Did you find this answer?
 

  

Isn't the best source for all your question those who are to give it to you - government? CRA, etc.?
Give them a call or two (depending how confident are you with the answers). Yes, it takes time to get through but with phone on speakerphone I see no issue waiting.

February 3, 2021
3:46 pm
Norman1
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James said
@save2retire@55:

… I was curious about #1 as well and could not find an answer after much research. They say you can go to your Service Canada account and get an estimate of your pension, but I was curious about what you asked which is if you are taking the pension at 65, and have only contributed, say $100 from a few paycheques, what is the minimum you will receive? They give a maximum and an average, but I couldn't find the minimum. I realize it also takes into account years of low income, but I'm talking about a very minimal contribution - only a few paycheques as you mention. …
 

The minimum is likely $0.

Doug Runchey gives a more detailed six step calculation in How to calculate your CPP retirement pension.

The steps suggest that CPP is around 25% of some kind of average of one's pensionable earnings from age 18 to when you retire. If the average earnings works out to be $50/year, then one will get a $12.50/year CPP pension!

February 3, 2021
5:30 pm
Bill
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I agree, Norman1, if someone contributes about $100 over a few paycheques during ages 18 - 65 (or 60) then their CPP retirement pension calculation will be pretty close to zero. Alexandre provided the needed links in post #3 for anyone who wants to learn.

February 3, 2021
5:30 pm
Loonie
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There is no reason for there to be a CPP minimum as it is based on your contributions, according to a formula. If you contributed very little, you will get very little.

There is a maximum, which is clearly stated and is related to the maximum pensionable earnings and related contributions, which is also clearly stated. It can be increased, however, if you delay CPP to age 70. There is also the Post Retirement Benefit which can be added on, for people who elect to take CPP at 65 but are still working and contributing up to age 70. Once you reach 70, you do not and cannot contribute to CPP.

The one you have to watch out for is the CPP survivor benefit. If you request a statement of contributions from CPP (which I recommend you do periodically), it will give you an estimate for survivor benefit. This amount is bogus and rarely if ever applies because the calculation is complex and pretty much guarantees that survivor won't get much. Survivors do not get any benefit from contributions made by spouse to CPP between 65 and 70 years.

If you have unresolved questions about CPP, then by al means phone CPP. I have found that they try their best to help and will stay on the phone with you for a long time if needed.

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