Every January, the Canada Pension Plan (CPP) updates its figures. If you are already receiving CPP benefits, you will see a 6.5% increase to account for inflation. If you haven't started collecting CPP, there will also be an increase in your benefit. The contribution rate has increased from 5.70% to 5.95%, which means that if you are currently employed, you will be contributing more to your CPP, and your employer will match this larger contribution. For self-employed individuals who contribute to CPP, both components of the pension will need to be added, totaling 11.90%. In 2023, the maximum pensionable earnings have also increased to $66,600, and the 5.95% contribution rate applies to income up to this amount. Once you reach $66,600 in earnings for the year, you will have maxed out your CPP contribution. The maximum monthly CPP benefit has also increased to $1,306.57 at age 65.
Old Age Security (OAS) also makes adjustments, but unlike CPP, it updates quarterly in January, April, July, and October. The OAS pension increased in January, and the maximum monthly pension is now $687.56 at age 65. Canadians over the age of 75 receive a 10% bonus, and their maximum monthly pension is now $756.32. However, there is a clawback for OAS, meaning that if you are collecting OAS and your income exceeds a certain threshold, the government will reduce your OAS pension. For the 2022 tax year, the threshold is $81,761, and for every $1 above that, your OAS pension will be reduced by $0.15. If your 2022 income exceeds $134,626, all of your OAS will be clawed back. The current threshold for 2023 income is $86,912. For those still saving for retirement, the last day to contribute to your RRSP and use the tax deduction on your 2022 tax return is March 1, 2023. Your RRSP limit is determined by your income, with the formula being 18% of your previous year's earned income less the pension adjustment. There is also a maximum for this formula, which will be $30,780 in 2023. Your RRSP contribution room carries forward, so any unused portion will be added to your tally for the next year. You can check your RRSP room on your Notice of Assessment or by logging in to your CRA account online. The TFSA limit has also increased to $6,500 in 2023, and it is not income-dependent. The total TFSA contribution room since its inception in 2009 is $88,000. A new addition for 2023 is the Tax-Free First Home Savings Account (FHSA), which is expected to be available on April 1, 2023. This account is designed to help first-time homebuyers save for a house and combines some of the best features of an RRSP and a TFSA. You can contribute up to $8,000 per year to the FHSA, and a total of $40,000 can be added during the lifetime of the account. Contributions are tax-deductible, like an RRSP, and there is no tax on withdrawals for home purchases, like a TFSA. Make sure to consult with your financial professionals to ensure that your plan is updated for 2023. CG WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA The comments and opinions expressed in this article are solely the work of Clinton Orr, not an official publication of CG Wealth., and may differ from the opinion of CG Wealth’s Research Department. Accordingly, they should not be considered as representative of CG Wealth’s beliefs, opinions or recommendations. All information is given as of the date appearing in this article, is for general information only, does not constitute legal or tax advice, and the author Clinton Orr does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or CG Wealth. assume any liability. Tax & Estate advice offered through CG Wealth & Estate Planning Comments are closed.
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AuthorClinton Orr is a Senior Wealth Advisor and Senior Portfolio Manager with Canaccord Genuity Corp. Archives
July 2023
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