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Pension Split

Mediman14

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It’s been awhile since I been on this site! Lots of therapy, physio (ongoing), surgery, etc!!
When opting for pension splitting on taxes, does anyone know what the disadvantages are to pension splitting?

thanks
 
It’s been awhile since I been on this site! Lots of therapy, physio (ongoing), surgery, etc!!
When opting for pension splitting on taxes, does anyone know what the disadvantages are to pension splitting?

thanks
Possibly where you might wish to report your income as being a certain amount, but only individual income would qualify, vice household income…and technically your spouse would claim the split portion, so you wouldn’t be able to *claim your entire pension as your own income. That’s perhaps a stretch. Dunno. I don’t think twice about splitting. The tax benefit is notable.
 
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I have done pension splitting since 2016. Even though I was 43 and my spouse was 49, we both have a CF Pension. I could split using his or mine. Since his pension / income is significantly lower than mine, I split mine and allocate as much as allowed to his. I can only allocate half of my cf and psac pension. Once I turn 65, I will be able to use other income like RIFs.

Whether it’s worth it or not… depends on how big the gap in income you have between your income and your spouse. My income is more than double his… so I lower my taxable income / bracket a fair bit. There is no down size other than if you go for a bank loan in your name and have to explain your taxable income has pension splitting… as the bank looks at that first and gets confused when your reported income doesn’t match the taxes…. That’s the only issue I ever ran into.

When I turn 65 (or if possible if eligible to do so when spouse turns 65), I plan to do the other form of pension splitting where I can allocate up to 50% of my Canada pension based on how many years a couple has cohabitated together… to bump up his CPP. This might help him more and this money should not be subjected to the vac clawback… as they only claw back my income as I am DEC. Should we separate or one of us dies, then the splitting stops… after you report the info to CRA.
 
Possibly where you might wish to report your income as being a certain amount, but only individual income would qualify, vice household income…and technically your spouse would claim the split portion, so you wouldn’t be able to *claim your entire pension as your own income. That’s perhaps a stretch. Dunno. I don’t think twice about splitting. The tax benefit is notable.
Thank you!
 
I have done pension splitting since 2016. Even though I was 43 and my spouse was 49, we both have a CF Pension. I could split using his or mine. Since his pension / income is significantly lower than mine, I split mine and allocate as much as allowed to his. I can only allocate half of my cf and psac pension. Once I turn 65, I will be able to use other income like RIFs.

Whether it’s worth it or not… depends on how big the gap in income you have between your income and your spouse. My income is more than double his… so I lower my taxable income / bracket a fair bit. There is no down size other than if you go for a bank loan in your name and have to explain your taxable income has pension splitting… as the bank looks at that first and gets confused when your reported income doesn’t match the taxes…. That’s the only issue I ever ran into.

When I turn 65 (or if possible if eligible to do so when spouse turns 65), I plan to do the other form of pension splitting where I can allocate up to 50% of my Canada pension based on how many years a couple has cohabitated together… to bump up his CPP. This might help him more and this money should not be subjected to the vac clawback… as they only claw back my income as I am DEC. Should we separate or one of us dies, then the splitting stops… after you report the info to CRA.
Thank you,
There is a significant difference between my spouse and I income. She just works at the canex. !
 
Income splitting / retirement planning need to be part of your early discussions with your spouse; you goal should be to understand tax implications of income and savings in both working and retirement years, to minimize combined tax liability.

For example: If you work in a job with a defined benefit pension, but your spouse does not, it may make sense to make spousal RRSP contributions during your working years instead of personal contributions, so that in retirement the RRIF income generated will be taxed in their hands at a lower rate (since presumably your marginal rate would be higher). There are other considerations as well for tax sheltered (TFSA) and non-tax sheltered savings and investments (for example, Canadian dividends are tax advantaged, but as your income in retirement increases, the method of that tax advantage may result in premature clawback of OAS - maybe hold those in a TFSA).

As with anything financial, investigate and do your homework. And don't make decisions on your long term financial health based on one random guy like me on the internet saying something.
 
For example: If you work in a job with a defined benefit pension, but your spouse does not, it may make sense to make spousal RRSP contributions during your working years instead of personal contributions, so that in retirement the RRIF income generated will be taxed in their hands at a lower rate (since presumably your marginal rate would be higher).
This is a big one (Spousal RRSP), if it’s likely your earnings will be greater than your spouse’s. Like dapaterson notes, individual cases vary, but considerations as to how income will be taxed later in life should definitely be part of the consideration.

@Mediman14, if your serving, don’t forget that you have access to the SISIP financial advisors to assist your planning. 👍🏼
 
This is a big one (Spousal RRSP), if it’s likely your earnings will be greater than your spouse’s. Like dapaterson notes, individual cases vary, but considerations as to how income will be taxed later in life should definitely be part of the consideration.

@Mediman14, if your serving, don’t forget that you have access to the SISIP financial advisors to assist your planning. 👍🏼
I am not serving anymore. It has been almost 5 years now. I miss the great people that I worked with but do not miss the politics and drama!
 
I am not serving anymore. It has been almost 5 years now. I miss the great people that I worked with but do not miss the politics and drama!
Actually, I may have inadvertently implied a limit on SISIP’s support to you…you should still be able to receive support from them. I check in with them once in a while since I got post-release group term life insurance.
 
Income splitting / retirement planning need to be part of your early discussions with your spouse; you goal should be to understand tax implications of income and savings in both working and retirement years, to minimize combined tax liability.

For example: If you work in a job with a defined benefit pension, but your spouse does not, it may make sense to make spousal RRSP contributions during your working years instead of personal contributions, so that in retirement the RRIF income generated will be taxed in their hands at a lower rate (since presumably your marginal rate would be higher). There are other considerations as well for tax sheltered (TFSA) and non-tax sheltered savings and investments (for example, Canadian dividends are tax advantaged, but as your income in retirement increases, the method of that tax advantage may result in premature clawback of OAS - maybe hold those in a TFSA).

As with anything financial, investigate and do your homework. And don't make decisions on your long term financial health based on one random guy like me on the internet saying something.
Thank you,
I appreciate the insight. I am one that never did pay any attention to RRSP's etc. I must admit that I am thinking about the RDSP. I am sure if I ever the banks on opening such account they would give me info but is it in their best interest or mine?
 
Thank you,
I appreciate the insight. I am one that never did pay any attention to RRSP's etc. I must admit that I am thinking about the RDSP. I am sure if I ever the banks on opening such account they would give me info but is it in their best interest or mine?
I think you have received some good advice here. I'm not the sharpest knife in the financial drawer and when I was working, I simply didn't have the time (or interest) to navigate the savings/investments/stack market/tax deferral world, so I got a financial advisor. Yes, they have a cost, but if you are going to go a similar way, I would strong suggest an independent one or one that works for an investment company that 'sells' a range of products. Banks will only sell their products. Ask friends, do interviews. We interviewed three something like 35 years ago that were recommended by others. The guy we landed on has been solid ever since. Not every move was a winner - they're not magicians - but positive over the longer term.
 
Thank you,
I appreciate the insight. I am one that never did pay any attention to RRSP's etc. I must admit that I am thinking about the RDSP. I am sure if I ever the banks on opening such account they would give me info but is it in their best interest or mine?
There is grant money to be had with a RDSP if you are under 50 and you can go back 10 years from when you got your disability status. My disability happened in 2011 when I was 40 but I didn’t get qualified for the DTC credit until I was 46, If I remember correctly, they let me go back to 2011 and I could claim those years back to a maximum credit of 12,000 in a year. I was able to get almost all of it but the grants stop at age 50. I was able to get about 27,000 in grant money with about 8000 in contributions. So if you are under 50 with DTC, You need to open an account. I used Mackenzie financial, but there are many companies that you can open accounts with… doesn’t have to be the bank. But if you are over 50, it’s just a place to tax shelter money like an rrsp. You pay taxes on your withdrawals related to your gains… and no withdrawals before age 60 / and it has to vest for min of 10 years… or the govt will claw back their grants.
 
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