Canadians are getting older—it’s estimated that the average Canadian will live to age 87.
As a retirement a rule of thumb, estimate that you will live 20 to 25 years after age 65.
So in planning your fiscal retirement, develop an expense budget to see how much income you will need to cover your expenses during that period. Keep in mind that you may be more active in early retirement and have more expenses than you might later on.
If you have pending health issues, the estimate for home health care is between $800 to $1,000 a week whether you remain in your own home or move into a care home.
The good news is that many of the care homes are subsidized.
Another good source of information are relatives and friends who are currently or have been retired for some time. Ask them about some of the challenges and expenses they have had to face in their retirement years.
Once you have determined how much income for your retirement, you need to look at sources of funds available to achieve your goal.
The typical retirement income sources are Canada’s Public Pension system, company pension plans, personal RRSPs, other savings, various provincial benefit programs, part-time or temporary work, or renting our real estate property.
There is also the Old Age Security that has a Guaranteed Income Supplement (GIS) component for low income seniors. The OAS and GIS are adjusted every July after the filing of your tax return. In order to receive the full benefit of the OAS, you will need to have lived in Canada for at least 40 years.
The OAS you will receive if you have net income less than $70,954, is a maximum of $6,553.
If your net income is greater than $70,954 and up to $114,640, you will receive a prorated amount. And it will be zero if your net income is over $114,640.
Some ideas for the provincial benefit program in B.C. are premium assistance with the B.C. Medical Plan, hardship assistance, international benefit programs for those who have lived or worked in another country, sales tax credit for low to moderate income residents, a senior’s supplement, and annual public transit passes.
There are also some potential tax credits when you file your federal income tax return. If you are 65 years and older and your net income is less than $34,562, you would qualify for the age amount credit of $6,854.
If your income is between $34,563 and $80,256, you would qualify for a prorated credit.
And again, if your income is over $80,256, the credit would be zero.
If you have qualifying pension income, you qualify for the pension income credit of $2,000.
The medical expenses tax credit is available as long as you have qualifying medical expenses that total more than three per cent of your taxable income on line 236 of your return.
Under the medical expense umbrella is the disability tax credit. This requires that your doctor fill out form T2201 stating that there is a disability.
This tax credit is $7,697 federally and $7,394 for the province. There are also caregiver tax credits available for those who are taking care of disabled family members in the home. If you live in a care home, the medical care that you receive is deductible, but the accommodation costs are not.
In addition, you could decide to split your CPP at source with your spouse. Pension splitting is also available when you file your tax return based on eligible pension income including annuity payments from a pension fund or plan, RRIF payments and RRSP annuity payments.