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tax matters

Everyone needs income in retirement. Japanese Yakuza gangsters are no exception.

A few years ago, the Japanese government created rules to allow former gangsters to collect government retirement benefits. These are former gambling, loan shark and protection workers who might have left the Yakuza due to age, disabilities or excommunication.

The problem? Organized crime doesn't usually leave a paper trail, so the ex-mobsters will qualify for benefits if they provide a letter of retirement from their mob bosses. Where these letters aren't available, government workers will accept other forms of proof, like gang tattoos or criminal records.

In Canada, the requirements for collecting money from the government are a little different. There are two basic sources for retirement benefits in Canada: The Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) and Old Age Security benefits. I think a primer on government retirement income makes sense. Let's start by talking about the CPP and QPP.


Why talk about government retirement income? Because every Canadian has to take responsibility for understanding how to make ends meet for the balance of our days. And money from the government will be an important part of that support for many (check out the government's online retirement calculator to help with the math). In addition, the rules around government benefits have changed recently and knowing how much you're likely to receive and when can be confusing.


The CPP can provide a monthly retirement income to you starting as young as age 60, and applies in all provinces and territories, except Quebec (where the QPP provides benefits). You can apply for benefits as early as one month after your 59th birthday (although you won't receive payments until the month after your 60th birthday). You had to have made at least one valid contribution to the CPP to be eligible to collect, and the amount of your monthly income will depend on your lifetime contributions to the plan. You can apply online by visiting

The standard age at which people start collecting CPP is 65, but you can choose to start collecting as early as age 60, or as late as 70. If you start taking your pension before 65, you'll receive reduced payments, and similarly will receive increased payments if you start your pension between 65 and 70 years of age. Your payments will be adjusted every January if there's an increase in the cost of living as measured by the Consumer Price Index. Today, the average monthly benefit paid out is $619, but can be as high as $1,065.

If you're not able to work because of a disability, you could be eligible for the CPP disability benefit, and a child may be eligible for the CPP children's benefit if he is under age 18 or between 18 and 25 and attending school full time. Once you reach 65, your disability benefits will convert to pension benefits I've been speaking about.

Finally, I should mention the "general drop-out provision" in which the government will automatically drop a number of months of your lowest earnings when calculating your CPP benefits. This will increase your benefits. Starting in 2014, the rules improved to allow up to eight years of your lowest earnings to be dropped from the calculation. There's a similar "child-rearing provision" for those who stayed at home to raise kids.


Married or common-law couples can apply to share their CPP benefits. You can save tax by doing this. If, for example, you're in a higher tax bracket than your spouse, you can report up to one half of your CPP benefits on your spouse's tax return.

The arrangement is reciprocal so that you'll receive and have to report that same percentage of your spouse's CPP benefits on your tax return. You have to apply to share your CPP benefits, and Service Canada will determine the sharing percentage based on the number of months you've lived with your spouse while contributing to the CPP and will actually pay the shared portion to each spouse. (As an aside, this is something different than "pension income splitting," which applies to employer or other eligible pensions and allows you to simply report up to one half of that pension income on your spouse's tax return.)

A higher-income taxpayer who is entitled to the maximum monthly CPP benefit of $1,065 could save over $900 in taxes annually after sharing CPP benefits with a lower-income spouse who hasn't contributed to the CPP in the past.

I'll continue the conversation on government retirement income next time.

Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.