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HomeMoney SavingInflation a scourge for retirees? Ottawa’s silver lining(s)

Inflation a scourge for retirees? Ottawa’s silver lining(s)


Rising RRSP contribution limits

Inflation additionally influences RRSP most contribution financial savings limits. In 2021, the restrict was $27,830. For 2024, it’s $31,560, which is a distinction of 13.4%. Over the same time interval, 2018 to 2021, it rose from $26,230 to $27,830, a distinction of 5.7%. 

“Thus, current inflation brought on the RRSP restrict to greater than double over the same time interval,” Ardrey concludes. “This after all can improve your tax-deferred financial savings and in addition your annual tax deduction on your RRSP contribution.” 

OAS clawback threshold additionally rises

Among the many goodies that may attraction to Canadian retirees is the rising threshold the place they could encounter clawbacks of OAS advantages. Many retired {couples} in Canada pay shut consideration to this on the finish of each calendar 12 months. 

The purpose is for every member to maximise retirement earnings from all sources (pensions, investments, and so on.) however to remain barely beneath the purpose the place Ottawa begins clawing again OAS advantages. 

In spite of everything, OAS funds are for a lot of a welcomed $690-a-month fee (that’s earlier than tax) or $8,300 a 12 months, and it’s inflation-indexed besides. In 2020, the brink at which OAS advantages started to get clawed again was $79,054, in keeping with Hector, however that quantity has risen yearly: to $86,912 in 2023 and a projected $90,997 in 2024. 

So, senior {couples} with related incomes in Canada ought to be capable to earn virtually $182,000 between them earlier than even beginning to see their OAS advantages get clawed again. And if that does occur, that’s what many would describe as a “good drawback to have.” 

Is CPP inflation hedging a purpose to take CPP a bit early?

Happily, CPP advantages are not clawed again at any stage, though after all they’re nonetheless taxable. Right here too, inflation indexing involves the rescue for retirees and semi-retirees. In actual fact, for the second 12 months in a row semi-retired actuary Fred Vettese argued that Canadian near-retirees hoping to maximise CPP payouts by ready to age 70 may as a substitute take it a 12 months or two early to benefit from inflation changes that kick in every January. 

Vettese recommended that in late 2022—and extra just lately on this article—that these considering of beginning CPP in 2024 ought to begin it earlier than the brand new 12 months. He responded in an electronic mail to me: “I decided it positively made sense to start out it in late 2023 as a substitute. Doing so is price an additional few thousand {dollars}.”

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