Vol. 10, #11.1 – August 10, 2018 – ALLAN GOLD’S BLOG
Fourth blog post of series on Elder Law for seniors and their families, particularly spouses, adult children, caregivers, etc.
Note: This the follow up section to last weeks post “Pensions & Retirement Income (Part #2 Commentary): Government Plans- Rules That May Limit Monthly Check **
BLOG ALERT! We have interrupted the business series to bring you in this space another series, this one on Elder Law, another area of specialization of Attorney Gold.
OPEN LETTER TO READERS FROM A. J. GOLD:
You may or may not know that Elder Law is another area of specialization of mine. Today, I am addressing a big area of concern to everyone, notably money, or as otherwise known, in the parlance of those 50+, Pensions (& Retirement Income). If you’re approaching ‘senior hood’ or already a retiree, I have a few questions for you. 1. “Do you think about your retirement?” 2. “Do you stress over your pensions, be it to be government, company, etc.?” or 3. “Are you concerned about the revenue of an elderly loved one?” If so, you’re in luck. I have written a multi-part blog on topic. Consider it, if you will, something that I call ‘pension education’; or ‘PEN-ED’ for short. The first earlier this month was about company plans, such giving particular emphasis to the problem of pension deficits. The second dealt with making (non-registered) investments so as to provide for retirement. And today, I will cover governmental plans, particularly focusing on the rules that may lessen your monthly check. So if money is important to you, I invite you to continue reading below.
Note. A.J. Gold is the author of the following books:
“Elder Law in Canada*ELIC*” It’s a ground breaking (2,500+ page) legal text, acquired by legal libraries, Bar Associations, and Law Schools. (For testimonials, excerpts etc, please visit www.practitionerspress.com)
“Estate Document Professor* EDP* (Part of the www.45pluslifehandbook.com* series), informing Canadians everywhere about greater estate preparedness, covering: Last will and testament (will); Power of attorney (POA); Advance medical directive (living will); Trust; Organ donation consent; Estate Inventory and Distribution Survey(For testimonials, excerpts etc, please visit www.practitionerspress.com)
Governmental Pensions (GP): Commentary.
Here’s the scoop on Governmental Pensions (GP).
OAS ISSUES. Most people know that it’s universal, and so applicable to everyone; but many don’t know about the criteria governing OAS eligibility. And while a big majority might think that income is irrelevant, many are unaware of the notion of “claw back”, And although a great number of persons think that this program is “guaranteed”, many don’t know about the conditions, inter alia those regarding the timing of your application. Here’s more.
- Universality. Many are aware of the notion of ‘universal pensions’, but they probably have not taken the time to look it up. Don’t worry, I did. “The term citizen’s pension (known also as universal pension, demogrant or categorical pension) is used to describe a social pension that realises the right to basic income in old age. : (Source: https://www.google.com/search?client=firefox-b-1&ei=bSRjW-_fDOmsjwSMs7_ICQ&q=universal+pensions&oq=universal+pensions+&gs_…) Nevertheless, you still must qualify for the pension.
- Relevance of Income. While the OAS is theoretically for everyone, most people are unaware of the notion of “claw back’. This means “the recovery of money already disbursed”(Source: https://www.google.com/search?client=firefox-b-1&ei=VFVgW7uJKYT45gLO7oqwBg&q=definition+clawback&oq=definition+&gs_). In the context of public pensions, it refers to the means by which Canada taxes back the OAS pension from those over a certain income threshold.
- Not guaranteed indefinitely. When it comes to OAS, you forfeit benefits if you fail to apply on time.
INDEXING. It is defined as follows. “Indexation is a technique to adjust income payments by means of a price index, in order to maintain the purchasing power of the public after inflation, while deindexation is the unwinding of indexation.” (Source: https://en.wikipedia.org/wiki/Indexation). This is the mechanism whereby the government strives to keep benefits in line with inflation and avoid a decline in real dollars to the pensioner. So it’s a good thing, but there is a flip side, which is “Progressive Tax”. This means “…a tax in which the tax rate increases as the taxable amount increases. The term “progressive” refers to the way the tax rate progresses from low to high, with the result that a taxpayer’s average tax rate is less than the person’s marginal tax rate.” (Source: https://en.wikipedia.org/wiki/Progressive_tax ) So while a pensioner might have his or her pension amount increase, it’s also possible that with other increases in revenue, he or she might be pushed into a higher tax bracket and end up with less disposable income from the respective pension.
PROBLEM AREAS. For your information, here are some possible problem areas
- Social Insurance Number (SIN). In this day and age, should the bad guys get your personal information you can be robbed of money and be a victim of identity theft. I cannot say enough about how important it is for you NOT to give out your SIN number.
- Birth certificate. While birth record keeping in Canada is good, such may not be the case in some other countries during certain time periods. This can sometimes pose a problem when applying for a government pension. It may delay things – that’s why you should address this matter now and not wait. Of course, it’s best to have this documentation in hand so you’re ready when the time comes to make your pension application.
- Foreign Pension. This speaks to the dimension of pensions in the international sphere. As people emigrate, these immigrants may already have a pension entitlement from their birth country. Please note that if you receive a pension from another country, you must report the total amount on your return in Canadian dollars. And if there is a tax treaty with the country your pension is from, you can claim a deduction on line 256 for the part of your foreign pension income that is tax-free in Canada.
- Name. At the start of the application process, there can be a problem with your name. Your birth certificate may reflect a name different from the one that you usually use. This could result from the use of a slight name variation or a misspelling. Of course, this is about an applicant proving who he or she is. And this takes proof. But recognize that logic is a key element in this regard. And of course, you have a half a chance if it makes sense. But understand that you won’t get the benefit of the doubt to the nth degree.
- Intermediary. A pension application is a unilateral act by one person. You can make your application yourself (and/or with the help of adult children) and pursue the application process, the whole without the need of an intermediary. However, it’s possible for someone having the authority to act on behalf of the applicant, to sign the application. This would involve a Power of Attorney (POA) or a trust situation. BE careful especially with third parties – the danger is financial elder abuse. (N.B. Please be informed that “you can authorize a person to give information to and receive information from Service Canada on your behalf by signing in to My Service Canada Account (MSCA) or by completing the Consent to Communicate Information to an Authorized Person form (ISP1603CPP) and mailing it to the Service Canada office. …This form does not provide authority for the person to apply for benefits on your behalf, change your payment address, or request or change the withholding of tax.”).
- Banking concern & bonus: A pension (apart from the spousal benefit) is for the pensioner. However, another person may be added to the equation, this through the banking of the checks. Usually, the applicant is given the option to choosing payment by direct deposit or by cheque delivered through the mails. (N.B. Be aware that even when one chooses the posting of checks, mail fraud involving pensions also does happen.) If he/she asks for direct deposit into a joint account with a spouse or another person, this spouse or person then has access to the funds and can misappropriate the same. And even when it’s deposited into an account, only bearing the name of the pensioner, misappropriation can still occur. This is where the account owner has granted a third party, a power of Attorney (POA) relative to a specific bank account or accounts. It should be noted that such could be the means for a perpetrator to suffer financial elder abuse onto a senior. In contrast, there is also a positive aspect to banking a pension – this is an “Overdraft protection”, being put in place by a bank. .You see, a financial institution might recognize the monthly pension inflow into your account and prompt overdraft protection corresponding therewith
- OAS Timeliness. There is a need to apply on time and not to be too late. In some ways, it could be likened to the “Best before” date system on packaged food products. This is because the later you apply, the higher the risk that you will start losing benefits. More precisely, “If you apply after you turn 65, Service Canada can only pay retroactive payments of the OAS benefits for up to 12 months (11 months plus the month you apply). However, if you were incapable of applying, retroactive payments covering a longer period may be granted.”(Source: https://www.google.com/search?q=if+late+in+applying+for+OAS&ie=utf-8&oe=utf-8&client=firefox-b-1)
- GIS Special Condition. If you don’t file income tax, you have a GIS problem.You see, you will qualify for GIS by filing your income tax return annually, by the deadline (April 30). GIS benefits are income-tested, that is to say, being contingent on your earning less than a certain threshold. GIS benefits will not start automatically since you must apply. But you only need to apply for GIS once. After that, Service Canada will automatically review your GIS entitlement each year, right after you file your income tax return.
- Death of a pensioner. On the death of a pensioner, heirs must advise the pension payer of the decease and any benefits paid after death must be reimbursed. There is always the possibility of being charged interest.
- GIS Take-Up. While there has been an improvement in the GIS take-up by historical standards, there are still thousands of eligible seniors who still don’t receive the GIS.
- CPP-QPP Not for everybody. The Canada Pension Plan (CPP) program, or that in Quebec, known as the Quebec Pension Plan (QPP) is not universal. Since it’s a workers’ pension, you pay into the program when working. It is available to eligible workers at age 65, or up to five years sooner at a reduced rate. It is intended to replace up to 25% of your full-time income upon retirement. However it is treated as taxable income. (N.B. It can affect the amount you receive from an Employer Pension, private disability insurance or Worker’s Compensation.)
- CPP –Loss of enhancements. Since there are enhancement if you defer benefits, your monthly check will be lower if you take the CPP when first able to do so. Currently, if you defer receiving CPP benefits to after age 65, your benefit is enhanced by 0.5% per month for each month of deferral up to age 70. Beginning in 2011 and fully phased-in by 2013, CPP benefits will be enhanced by 0.7% for each month of deferral after age 65. (N.B. Furthermore, the revised rules eliminate the work cessation test. It restricted your ability to collect CPP benefits if you were still working, depending on how much you worked. Under the new rules, you can work as much as you want and collect CPP benefits at the same time. However, you will be required to contribute to the CPP.)
- Incorrect CPP-QPP Statement of earnings. When working, you’ll periodically be receiving a statement of earnings. Your statement shows the employment earnings on which you have contributed to the Québec Pension Plan and the Canada Pension Plan & the amounts that could be paid at retirement. But mistakes do happen This is important since your pension is determined through a calculation based upon your earnings in your last 10 years of work. So if there is an error, under stating your revenue in one or more of the last years, this could prove costly in reducing your monthly check. That’s why you should check these statements very carefully. And on finding an error, report it to the pension office and provide the documentary proof as needed and see to the rectification of the records. ASK the name and coordinates of the person with whom, you are speaking and ask for a confirmation in writing once everything has been corrected.
- Pension litigation. Of course, denials are sometimes received by prospective beneficiaries. And mistakes do happen in pension payments, sometimes constituted as over-payments. When it comes to public pensions, here are two key areas.
– Review process. If your application is rejected, there are review level(s) giving you the right for a further look at your application. Note that there are a number of steps outlined in the rules/regulations and also time limits when filings must be made. PAY attention and follow the rules precisely.
– Overpayment recovery. If you misapply and secure payment in excess of your entitlement, KNOW that the government will usually discover the misfiling and make demand for the reimbursement of the overpayment with interest plus, plus, plus. Indeed, in pension land, this is the worst kind of trouble possible.
D. TIPS & RECOMMENDATIONS: The Governmental Pension – Top-10**
All prospective retirees (and their close family members) should:
1. SAY out loud (before retiring): “I have a few questions for you.*”
1.1 “Am I financially able to retire?” Yes (3)___No (1)___
Some sub-questions are as follows:
1.1.1 “How many years before retirement?” _______________________________ (2)
1.1.2 “How much money must be saved?” ________________________________ (3)
1.1.3 “What’s my income?” __________________________________________ (2)
1.1.4 “What are my likely expenses and sources of income at retirement? Name at least four of each.” (In the opinion of the writer, a majority of Canadians may have somewhat of an idea. But when it comes to those, who really know, The writer thinks that this segment will be in the range of single digit percentages. And for those who just don’t know, the writer believes that their numbers will be over 2/3rds. )
Expenses at retirement:
Sources of income at retirement:
(3 for three)___ (1for One or Two)___
1.1.5 “Where can I cut expenses?” ________________________________________(2) Business
1.2. “What is the status and condition of my business?” Some sub-questions are as follows:
1.2.1 “Will the business survive my death?” Yes (3)___No (1)___
1.2.2 “Will it thrive?” Yes (3)___No (1)___
1.2.3 “Have I put in place a generational transition plan? Yes (3)___No (1)___
1.3 Savings/investments for retirement
1.3.1 “How much money will I need to get by?” (The writer believes that there are a number of ways that change could affect the amount of cash coming into your personal coffers.) __________________________________________________________ (2)
Some sub-questions are as follows:
(a) “Do I know the revenues which I need on retirement?” Yes (3)___No (1)___
(b) “Have I calculated the total savings which I will need?” (The writer believes that a minority of Canadians have calculated somewhat closely.) Yes (3)___No (1)___
(c) How much do I need to be saving each year?” (The writer believes that many Canadians say they only have somewhat of an idea.) __________________________ (2)
(d) “What’s my investment strategy?”(N.B. It is expedient to settle on an investment strategy, same contemplating investment objectives and taking into account time horizon and tolerance to risk.) _________________________________________________ (2)
(e) “Do I consult with a financial advisor/planner, accountant, etc., about my retirement investments and retirement plan?” Yes (3)___No (1)___
(f) “Do I know the rate of return on my total retirement investment portfolio?” Yes (3)___No (1)___
Some sub-questions are as follows:
(i). “What is the annual rate of return needed, give or take two percent, to hit my retirement goal?”______________________________________________ (3)
(ii). “Am I investing for maximum potential returns?” Yes (3)___No (1)___
(iii). “Do I invest each month?” Yes (3)___No (1)___
(iv). “Does my portfolio include a balanced mix of registered and non-registered retirement accounts?” Yes (3)___No (1)___*
N.B. If you score less than 40, the writer thinks that you have some research to do and then you should take the time to reflect big time!
* ©/TM 2005, 2018 Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED
2. PAY attention, when it comes to pensions (& retirement income). Of course, this is obviously important to you.
3. DO not be one of those people who say, regarding public pensions, “What will be …will be”, taking what they get. Instead, REJECT a “Laissez Faire” attitude and TAKE some control back. ASPIRE to squeeze each and every drop that you are legally entitled, from the offered programs.
4. LEARN as much as you can about retirement, particularly without limitation, regarding retirement income. INQUIRE into the public pension programs (and available benefits) and how they work. And MAKE a thorough study of the topic. Of course, it’s in your personal interest to make a big effort in this regard.
5. GATHER up the needed paper work which you will need to submit during the application process. And SECURE all relevant application(s);
6. Take the needed time and REVIEW all of the material carefully.
7. THINK it through and DECIDE on the programs fitting your financial situation and the best way to go with available options;
8. APPLY as per the required time frame. This means completing the right application(s), taking care, to answering all questions and uploading and/or delivering to the right office the application (together with all required documents) and securing a written receipt- therefore.
9. RECOGNIZE that for many people, revenue in retirement might start with public pensions; but sometimes, it also ends with them. If you find yourself in this situation, it’s critical that you:
9.l GET the maximum possible from the governmental programs;
9.2 CONSIDER any and all legal means to supplement your income;
9.3 COMPREHEND (in all eventualities) that you’re on a fixed income and that you need to find your comfort zone. You see, you’ll do better if you accept that you must live on a budget, prioritize and keep your spending in check and under tight control.
10. BE happy and STRIVE to make your retirement as satisfying and fulfilling as possible.
E. CLOSING –LEGAL MATTERS!
So there you have it. In one mini report on governmental pensions, you have some key facts regarding benefits, eligibility, application process, etc. and also my list of several problem areas. But don’t stop here– it’s just a good start. Of course, you realize that due to space constraints, I’m unable to include everything. That’s why I encourage you to continue on with your research and inquiries. My hope is that you’ll become well-informed about public pensions, thusly better able to make good decisions respecting applications, options. For me, when it comes to retirement income via government programs, the goal is for you, NOT letting ‘the chips fall where they may’, but rather, in maximizing your NET revenue during your golden years.
And if you read this blog, you know that I say that legal matters; and accordingly, I believe that you should look to the law, if and when, facing obstacles on the road to obtaining your governmental pension benefits, and also to enforce your rights, and if need be, bring legal proceedings, seeking such benefits or asking for redress, etc.
So retirement is calling. I hope that you don’t miss the call. But, of course, you and I know that it’s your call. But if you ask me, I say: “Live retirement life on your terms and please do get the most out of your public pensions!**
F. SENIOR LITE SPOT: There’s absolutely nothing funny about getting old (& retirement/retirement income), except…
“A retired gentlemen went into the social security office to apply for Social Security. After waiting in line a long time, he got to the counter. The woman behind the counter asked him for his drivers license to verify his age. He looked in his pockets and realized he had left his wallet at home. He told the woman that he was very sorry but he seemed to have left his wallet at home. “Will I have to go home and come back now?” he asks. The woman says “Unbutton your shirt.” So, he opens his shirt revealing lots of curly silver hair. She says, “That silver hair on your chest is proof enough for me,” and she processed his Social Security application.” (Source: https://books.google.ca/books?isbn=148364605X)
*Voltaire: “I advise you to go on living solely to enrage those who are paying your annuities. It is the only pleasure I have left.” (Source: https://www.azquotes.com/quote/1306672)
* “Julius Caesar: Teacher: Have you ever heard of Julius Caesar? Pupil: ‘Yes, sir.’ Teacher: ‘What do you think he would be doing now, if he were alive?’ Pupil: ‘Drawing an old-age pension.” (Source: https://www.google.com/search?q=old+age+pension+jokes&client=firefox-b-1&ei=rcRXW_DUPMPH5gKIhpaQBw&start=40&sa=N&biw=1024&bih=639)
G. PREVIEW OF NEXT IN THE BLOG SERIES: RRSP
Do you think about your retirement? Do you stress over your pensions? Or are you concerned about the revenue of an elderly loved one. If so, you’re in luck. Continuing on, next week, I will address Registered Retirement Savings Plan (RRSP), Deferred Profit Sharing Plan (DPSP), Registered Pension Plan (RPP) and Registered Retirement Income Fund (RRIF). Interested? See you next time.*
H. NOTICE – CAUTION -DISCLAIMER
The material provided herein is of a general nature, strictly for informational purposes. The interpretation and analysis is not to be misapplied to a personal situation with a particular set of facts. Under no circumstances, are the herein suggestions and tips, intended to bring a reader to the point of acting or not acting, but instead, the hope is that they are to be a cause for pause and reflection. It is specifically declared that this content is not to be a replacement of or substitution for legal or any other appropriate advice. To the contrary, for more information on these presents, related subjects or any other questions, it is the express recommendation of the author that everyone seek out and consult a qualified professional or competent adviser.
* ©/TM 2005, 2008 Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED
** ©/TM 2015, 2016, 2017, 2018 Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED