As part of our RRSP coverage, we asked Clay Gillespie, a Vancouver-based certified financial planner and chartered investment manager, to answer selected reader questions.
Question: I invest every year in my RRSP. Will my Canadian pension plan - that I will receive when I retire - be affected?
Answer: Your income level itself does not affect your Canada Pension Plan (CPP). The CPP benefit you will receive is based on how much you have contributed to the plan and how long you have contributed.
But when withdraw funds from your RRSP it is treated as taxable income and if your income is too high, you might lose some government benefits. For example, your net taxable income might impact benefits like your Old Age Security (OAS) payments.
The maximum OAS you can receive each month is $546.07. OAS is not based on your contributions, the way CPP is, but is instead based upon residency. You are entitled to a full OAS benefit if you have lived in Canada for 40 years after turning 18.
The OAS “clawback” starts when your net taxable income reaches $70,954 and your payment would be completely eliminated when your net income reaches $114,640.
You may instead want to look at using a TFSA to save, if you think some of your government benefits might be reduced or eliminated by withdrawals from your registered funds (RRSPs, RRIFs, LIFs, etc.).
Clay Gillespie is a financial adviser and managing director at Rogers Group Financial. The views expressed are those of the author and not necessarily those of Rogers Group Financial.