Retirement Planning Pitfalls

If you're aware of these retirement planning pitfalls, you can do a better job of preparing for your retirement, especially with the help of DetectaPension.

• Total federal spending which benefits poor seniors is about $9 billion. The federal support for the retirement income of non-poor seniors is about $33 billion. So for every dollar given to poor seniors, almost $4 is given to the non-poor. [Richard Shillington article 'Futile Savers 140504]

• In response to a query about the issue of a weakness in the Government pension benefits Monica Towson, while addressing OSCO February 17, 2002, said "I believe there is and I'd like to explain why I think so. First we should look at the myth. The then Finance Minister Paul Martin first raised the alarm in his 1995 budget, when he kicked off a round of proposed cuts to public pension programs. In that budget speech, he told Canadians that if nothing were done, spending on Old Age Security and the Guaranteed Income Supplement, along with the Canada/Quebec Pension Plan would jump from 5.3% of Gross Domestic Product in 1993 to more than 8% in 2030. That sounds like a big increase, until you realize that OECD countries were already spending an average 9.2% of GDP in 1991 - nearly 40 years before Canada was expected to reach just 8% of GDP. The health care costs as a percentage of Canada's national output or Gross Domestic Product are now marginally lower than they were a decade ago and remain comfortably below what the U.S. pays for a system that penalizes the poor."

• Mr. Walter Kelm (Consultant, Canada's Association for the Fifty-Plus: addressing the Standing Committee on Human Resources Development and the status of persons with Disabilities - Thursday, October 18, 2001) said "In the paper we put out three years ago-a copy of it is included in that brief-we saw a perception that the publicly financed and tax-assisted retirement systems represent a net cost to government. We took a look at that, and there are a lot of things that are omitted. When you factor all the considerations in, the publicly financed pension system and the tax-assisted plan are actually creating a surplus for the government of about $5 billion a year."

• June 01, 2004 VANCOUVER, British Columbia - A Paul Martin government will invest $2.5 billion over the next five years to enhance support for seniors, people with disabilities and family caregivers. Canada's low-income seniors will see their Guaranteed Income Supplement cheques increase, and caregivers of seniors and people with disabilities will be recognized with a major new program to support them. Increase in the Guaranteed Income Supplement (GIS). The GIS supplements the incomes of Canada's low-income seniors. The recent Liberal task force on seniors recommended that the base payment of the GIS be increased to reflect the fact that GIS payments have not kept pace with increases in Canadians' overall standard of living. To correct this, the Federal government will implement the task force's recommended increase of up to $433 a year for a single GIS recipient and by up to $700 for an elderly couple who are both receiving the GIS. These increases, which are approximately 7 per cent above current levels, will be phased in as quickly as possible. They are in addition to regular quarterly cost-of-living adjustments. The cost is estimated to be $1.5 billion over five years.

• In December '04 the 7,592 recipients of the Allowance for the Survivor received on average $523.57 or 56.66% of the maximum. The regular Allowance was on average $323.25 or 38.62% of the maximum amount.
• The number of beneficiaries of the Spouse's Allowance peaked in 1986-87 at 11,685 and in 1999-00 was reduced to 8,070 in accordance with an HRDC ISP division ruling.
• The group most in the dark about their potential benefits are widows between the age of 60 and 64. Sue Pitts, director of HRDC's old age security program confirmed that just 39 per cent received their Allowance for Survivors in 1998-99. That's only 33,000 beneficiaries of the 83,000 eligible. (Jen Ross The Ottawa Citizen Sunday, 090901)
• A 60 year old widow(er) who attempts to augment her/his Survivors Allowance by working part-time earning $1,000 per month, will realize a net gain in disposable income of only $171.00 per month, and s/he will also lose income-tested benefits.
• A widow(er) at age 60 that has lived in Canada for 10 years can receive up to $981.81/mo.
• Working widows(ers) between 60-64 lose $75.00 in benefits for every $100 of income for the first $600.00, then they only lose $50.00 for every $100.00 of income. Income is taxable and income-tested benefits are reduced or eliminated.

• The Canada/Quebec Pension Plan increased 1.7% Jan '05 in accordance with the cost of living index.
• The Canada Pension Plan is much sounder today than 7-8 years ago according to Judith Maxwell, President - Canadian Policy Research Network in an interview with Anna Maria Tremonti of CBC's The Current February 24, 2004.

• If your net retirement income is $101,118, you may still qualify for the OAS basic pension.

• Effective January 2005 in Quebec, Seniors receiving the maximum GIS will receive all of their prescribed medication free.
• The Federal government will implement the task force's recommended increase of up to $433 a year for a single GIS recipient and by up to $700 for an elderly couple who are both receiving the GIS. These increases, which are approximately 7 per cent above current levels, will be phased in as quickly as possible over five years. They are in addition to regular quarterly cost-of-living adjustments.
• The GIS value was last increased in 1984.
• In December '04 GIS was received by 227,569 with an average monthly benefit of $388.89 or 69.36% of the maximum.
• In December 2001 CCRA were aware that 220,000 seniors who receive the basic OAS are eligible but do not receive the 'Supplement'. An additional 50,000 receive neither the OAS nor the GIS.
• Seniors receiving the Guaranteed Income Supplement (GIS) who have employment income can deduct 20% of income to a maximum of $500, in order to qualify for more GIS.
• Only 15% of Seniors using food banks receive the 'Supplement'.

• In December '04, the 7,592 recipients of the Allowance for the Survivor received on average $523.57 or 56.66% of the maximum. The regular Allowance was on average $323.25 or 38.62% of the maximum amount.
• In December '04, GIS was received by 227,569 with an average monthly benefit of $388.89 or 69.36% of the maximum.
• In December '04, 1,026,413 Seniors received the basic OAS. They received on average $450.11 or 95.41% of the maximum of $471.76.
• Between Dec '98 and Oct '04 the Widows allowance recipients dropped from 8,668 to 7,592 (1,076) or 12.4% reduction while the number of basic OAS recipients increased by 11.3% and those receiving the GIS by 7.16%.
• In 2003-04, $391 million or 1.84% was spent on the Allowance benefit program - an increase of 0.26% in five years.
• In 2000 the number of men living in low income and living alone was 80,680. The number of women 332,520.
• Between 1985 and 2000 the OAS basic monthly benefit increased by an annual average of 2.89% or $8.16/year. 1,109,674 began receiving benefits.
• During the same period the Supplement increased by 2.73% annually or $5.81/year. 71,700 additional seniors began receiving the GIS.
• The number of beneficiaries of the Spouse's Allowance peaked in 1986-87 at 11,685 and in 1999-2000 was 8,070 in accordance with HRDC's ISP division.
• In 1999-2000 the OAS allowance included $390 million or 2.15% of the program expenditure. In 2003-04 $391 million or 1.84% was spent on the Allowance benefit program - an increase of 0.26% in five years.
• Spouse's Allowance beneficiaries fell by 1,009 to 15,141 and the average annual increase was $5.20 or 2.01% annually. (Forecasting, Information & Results Management Division, ISP - HRDC (1985-2000). HRDC noted "period chosen following major revisions to the ISP in 1979 & 1984 and the components are comparable."

• "Ontario Teachers Pension Plan invested $64 million in the tobacco industry." [Rick Mercer on CBC's "The Current" February 24, 2004]
• A government study in 1998 concluded that the publicly financed pension system and the tax assisted plan are actually creating a surplus for the government of about $5 billion each year. [Mr. Walter Kelm, Consultant, Canada's Association for the Fifty-Plus: addressing the Standing Committee on Human Resources Development and the status of persons with Disabilities - Thursday, October 18, 2001]

• In December '04 1,026,413 Seniors received the basic OAS. They received on average $450.11 or 95.41% of the maximum of $471.76.
• The OAS rates are based on the average Consumer Price Index and are adjusted quarterly (in January, April, July, and October). Over the past year, OAS benefit rates have increased 2.2 percent overall.
• In 2002 $77 million in OAS benefits was paid outside Canada to about 4,800 Seniors.
• The maximum amount of Old Age Security benefits a resident of Canada for forty (40) years can receive is approximately $1,000 per month, part of which is taxable income.
• One out of five eligible seniors is missing out on their full Old Age Security benefits.
• You can receive the basic OAS benefits while living in other countries providing you meet certain conditions. The Supplement and the Allowance is limited to six (6) months if not residing in Canada.

• If you are at least 65 and have lived in a country that Canada has a reciprocal social security agreement and you have lived in Canada for at least one (1) year, you may qualify for a minimum amount of the basic monthly Old Age Security benefit and depending upon your income - you could qualify to receive an additional $1,000 per month tax-free. A widow(er) could receive over $900 starting at age 60.

• RRSP bombshell - Have Canadians been victims of a fraud? Gordon Pape, author of numerous books, quoted from a C.D. Howe Institute report authored by Richard Shillington who holds a doctoral degree in statistics. A new report from the C.D. Howe Institute, a think-tank specializing in economic and social policy issues, charges that almost a third of Canadians with RRSPs have scrimped and saved for nothing because most or all of the benefits they receive from their plans will be taxed away by governments. In a hard-hitting document that stands conventional wisdom on its head, Richard Shillington charges that millions of people who are at or approaching retirement age "are victims of a fraud, however unintentional." His message is that people with less than $100,000 in retirement assets are futile savers.
• 50% of Canadians invest in RRSPs. The average retirement savings in 2003 was $42,000. Ideally it should have been $500,000 for a comfortable retirement for 25 years according to Don Laursen, Senior Scotiabank VP, in conversation with CBC's Anna Marie Tremonti of "The Current" 240204

• Recipients can earn US$800 per month without having their Social Security benefits reduced. If you are under 65 you will lose $1 for every $2 you earn over $9,600 and if you are 65-69 you will lose $1 for every $3 over earnings of $15,500. [Ellen Hoffman Author 'How to maximize Social Security Benefits']

DetectaPension does NOT offer financial planning services. We do only one thing and that's helping seniors to protect their pension rights and give advice to help avoid the usual retirement planning pitfalls.

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