2. If we have income from bonds,etc, are there any strategies we can use to reduce our income to get more GIS?

By mistake? Don’t worry, you should be fine.

They will offset, so you should be okay. The GIS Clawback is on “net income”. Your withdrawal will increase taxable income and the contribution will reduce it, so your net income should be the same.

That assumes that you have RRSP room, are under age 72, and that you contributed the same amount your withdrew. You would need to contribute the same gross amount, not the net cash you received after the tax withholding.

Ed

CPP – $30.744 billion
OAS – $27.578 billion
GIS – $8.080 billion
Allowance – $552 million

Found here http://www.hrsdc.gc.ca/eng/isp/statistics/rates/julsep09.shtml#topic4

Good arictle. This is a huge planning issue for seniors. It essentially means that the first $10,000 they make is taxed at 50% and the next $11,000 (income $10K-21K) is taxed at a whopping 71%! This includes income tax plus the GIS clawback.

This is the highest tax brackt in Canada and it is charged not to those making huge incomes, but to seniors making less than $21,000/year.

There is a logic, however, since we want the government to help these low income seniors, but not if they don’t need it.

This is why the TFSA is better than the RRSP for those that will be in this income level. Perhaps withdrawing the entire RRSP in one shot and then investing non-RRSP in tax-efficient investments. These people must avoid dividdend stocks, since the clawback is on the grossed-up income.

There are all kinds of tax planning options, but it is more benefical for these seniors to do tax planning those under 65 with very high incomes.

Ed

http://www.winnipegfreepress.com/business/modernizing-cpp-main-goal-of-proposals-49837372.html

The discussion regarding OAS should consider what requirements exist to get OAS ie) time period of residence as well as credit for living in a treaty based country etc…. not every senior in this country is eligible for the full amount of OAS.

In addition OAS is a non-contributory program unlike CPP.

The last time I checked and researched, I found no indication that I would live to 78 or that my circumstances and health would guarantee that I would enjoy the monies in the twilight of my life.

CPP@60…

Cheers

That is why I wonder what the total benefit payouts are between GIS and OAS. Would they reduce OAS benefits first (which probably would affect more people) to try to ensure that the most needy (i.e. GIS recipients) are less likely to be impacted, OR would they reduce the GIS benefits first because there is greater likelihood that more voters would revolt?

Perhaps there will be a movement to lower the limit where the OAS clawback begins. It does seem incredible that an individual could make more almost $65k before the OAS payments will diminish.

I’d like to see them adopt a similar structure to the CPP – if you want to take OAS early, you can but you also have the benefits reduced accordingly. It might actually save the government money to do that since, if I remember correctly, they project that you are better to wait to collect the CPP if you believe you will live to 78.

With the average life expectancy getting into the low 80’s (and increasing) if the government can encourage people to take less money earlier it would seem that over the long haul they will actually reduce their liabilities.

Thanks, you make the point exactly. That is why I receive peanuts each month as Child Tax Benefit because of the income I claimed from the year before. I don’t worry that I am not receiving more from the Govt in this aspect because I made a lot more monthly to begin with.

Perhaps I am missing something??

“Remember that the calculations are done annually and reset in July of the current year based on the previous year’s income.”

There are 3 categories of individuals in our society that are eligible to receive supplements.

1) Canadian residents who are 65 or older and who meet the residence requirements

2) The Allowance is also available to 60 to 64 year-old low-income spouses or common-law partners of OAS pensioners who receive the GIS.

3) The Allowance is available to survivors of low-income widowed spouses or common-law partners between the ages of 60 and 64.

Follow the following CRA sites to get a feel of what is available, under what circumstances and use the calculators to determine specific amounts taht are available on an annual basis. Remember that the calculations are return annual nd rest in July of the current year based on the previous year’s income.

http://www.servicecanada.gc.ca/eng/isp/oas/tabrates/tabmain.shtml

http://www.servicecanada.gc.ca/eng/isp/oas/oasrates.shtml

To take advantage of the benefits available and how to maximize and determine an approach for individuals to “take advantage” (if I can call low income individuals taking advantage) requires individual attention and calculations.

In the above scenario where there RRIF or RRSP income, one should consider a complete withdrawal or a staged withdrawal of the funds to position oneself to be eligible. Especially now with a TFSA of 5K/individual a rollover of withdrawals can be advantageous since they are tax exempt. It is not unusual for some seniors to take a one time hit and meltdown their RRSPs/RRIFs in one year and then start to qualify for the tax free GIS supplement in the following year.

As was pointed also there are other potential benefits for qualifiers as in BC most will quailfy for MSP premium (equivalent to OHIP – Ontario) assistance as well as very low deductibles and minimal fees for drugs (Pharmacare).

“canucktuary”

If you do not qualify for GIS because of age or circumstance, in our society you would still eligible for social assistance (we used to call it welfare). Every province provides for it. If an individual receiving social assistance turns 65… guess what … he no longer receives it and now is eligible for GIS.

Someone will have to pay for it either provincially or federally as that is what separates our taxation system from others. I do not believe for one moment that in an enlighten society that we would ever abandon those who need our assistance. That is where some of our tax dollars go….

Cheers

ms save money: I don’t think there is an equivalent in the US as this is one of the more socialist programs that the canadian government offers.

It might also be prudent that if the person is forced into withdrawals that exceed required income that s/he place that excess into a TFSA. That way, when the RRIF is exhausted they can withdraw money from the TFSA that also would not be counted towards income.

Perhaps it would be helpful to run scenarios where some of the RRSP is used to purchase an annuity with the remainder converting to a RRIF.

I would be interested to hear how much the government pays out in GIS benefits vs. OAS vs. CPP on an annual basis. We keep hearing the CPP is well funded – I wonder if the government has to scale back payments from the GIS or OAS which gets hit first and hardest.