CPP Rules

New CPP Rules

Here’s a reminder about some good news about Canada Pension Plan benefits. As of January 1, 2012, you no longer have to stop working to draw CPP. You can simultaneously receive and accrue CPP benefits between the ages of 60 and 70, which means you have increased potential to improve your retirement finances.

The old rules stipulated that you had to stop working in order to collect early CPP benefits. As of January 1 of 2012, that condition no longer applies.

CPP, EI and Tax Rates for 2012

It is a new year and the new tax rates are in.  There were not a lot of changes from last year.  Most money ranges and limits moved with the government's inflation index.

Federal Income Tax Rates	2012	2011
Basic Personal Exemption	$          10,822	$          10,527
15% on the first:	$          42,707	$          41,544
22% on the next up to:	$          85,414	$          83,088
26% on the next up to:	$        132,406	$        128,800
29% on the income over:	$        132,406	$        128,800
Alberta Income Tax Rates	2012	2011
Basic Personal Exemption	$          17,282	$          16,977
Tax rate	10%	10%
CPP	2012	2011
Maximum Pensionable Earnings	$          50,100	$          48,300
Basic Exemption	$            3,500	$            3,500
Rate	4.95%	4.95%
Employee & Employer Max.	$            2,307	$            2,218
Self Employed Max.	$            4,613	$            4,435
EI	2012	2011
Maximum Insurable Earnings	$          45,900	$          44,200
Employee Rate	1.83%	1.78%
Employee Max.	$               840	$               787
Employer Rate	2.56%	2.49%
Employer Max.	$            1,176	$            1,101

2011 RRSP contribution deadline is February 29, 2012. The contribution limit is $22,450, although if you have not contributed to the maximum in past years you have additional contribution room. You can contribute to RRSPs until you turn 71 when RRSPs must be converted into something else like a RRIF (Registered Retirement Income Fund).  The limit for 2012 is $22,970.

2012 TFSA contribution room is $5,000. If you haven't contributed in past years you can contribution up to $20,000.

OAS & CPP Facts and Myths

I've heard from dozens of people planning for retirement that they don't want to earn money in retirement because the government will claw back their Old Age Security and Canada Pension Plan payments.  I have to say that this course of thinking is based on some myths that actually encourage people to make less money when they probably need it most.  Below are the numbers that hopefully help those who have questions about OAS and CPP get the maximum benefit during their retirement.

Old Age Security (OAS) Facts:
2011  Maximum Monthly Benefit                                     $524.23 ($6,506.23 annually)
2011 Average Monthly Benefit to be paid out                    $490.47 ($5,885.64 annually)  
Individual Annual Income before any clawbacks start    $67,668.00
Individual Annual Income when no OAS is received    $109,607.00