O•S•C•A•R© - Old Ottawa South

Page 38 The OSCAR - OUR 40 th YEAR MAY 2012
by Rick Sutherland, CLU,
CFP, FDS, R.F.P
This question was submitted by
one of our Old Ottawa South
residents. We always appreciate
your comments, questions and article
requests. If it is within our field of
expertise we will do our best to give
you our honest answers and opinions.
The normal age to start drawing Canada
Pension Plan, CPP, is age 65. You can
begin drawing as early as age 60. But
there is a penalty for taking CPP early.
So this is an important question that
should be carefully considered.
In order to answer this question
there is another question that needs to
be answered first. “Do you need the
income in order to live?” If yes, then
taking CPP early is a must and should
be started as early as possible.
If you do not necessarily need
the income for day-to-day living then
there may be other reasons one would
want to start CPP early. It becomes a
supplement to current income from
employment, pension, RRIF, savings
etc. It allows more money to do things
By Anna Sundin
When you own and run your
own business, you’re
responsible for all aspects
of the business. What would happen if
When Should One Start Collecting CPP
while at a younger age. Some examples
may be for travel, hobbies, assistance
to children, etc. If not needed then the
extra money could be invested and
saved to build a larger estate or used for
other purposes later in life.
Recent changes to CPP have
increased the penalty reduction for
those who take CPP early prior to age
65. Under the old rules, if one started
CPP early at age 60 it took until age
76 to accumulate the same amount of
payments as if you had deferred until
age 65. When the new rules have been
completely phased in, by 2016, the
breakeven point reduces to age 74 for
those who take CPP early at age 60.
Let’s put some numbers to these
ages. The maximum CPP benefit
payable to a person age 65 in 2012 is
$986 per month. A person starting CPP
at age 60 in 2012 would see a penalty
reduction. Under the old rules the
maximum reduction penalty was 30%
or 0.5% per month for each month
that a person starts CPP prior to age
65. Beginning in 2012 the reduction
penalty will be increased by 0.02% per
month and increasing by 0.02% each
year until 2016. By 2016 the maximum
reduction penalty will be 36% for a
person starting CPP at age 60. So if a
person is eligible for the maximum CPP
benefit and ignoring any increases due
to inflation, by 2016 the monthly benefit
from CPP for a person age 60 will be
reduced to $631.
Oh, and by the way, you can defer
taking CPP until age 70. This will have
the opposite effect and increase your
CPP benefit. By 2013 the gross-up rate
will increase to 0.7% per month. Using
the same maximum benefit figure above
and ignoring inflation increases the
monthly benefit for a person who begins
drawing CPP age 70 will increase by
42% to $1,400 per month.
As you can see there is a lot of math
involved. Many people agonize, stress
and worry about their decision to take
CPP early or not. My view has always
been that money in the hand today is
always better than money in the hand in
the future regardless of the breakeven
point.
I guess the absolute and correct
answer to this question can be found in
your longevity. How long will you live?
If you plan to live past age 76 under the
old rules or age 74 under the new rules
As A Sole Proprietor, You Are Indispensable
you became seriously ill or died?
Your business would lose its key
person and your income source may
disappear. There may not be enough
income to manage all the business
liabilities if you died. Creditors could
press for immediate payment, and
accounts receivable might become
uncollectable.
If you die or become ill, your family
would face three alternatives:
1. They could continue the
business, requiring family members
to have: the ability and experience to
run your business; sufficient cash after
debts are paid; and, the ability to retain
your customers.
2. They could liquidate the business.
A forced sale attracts bargain-hunters
and with “goodwill” gone, the value of
the business may be drastically reduced
- by as much as 40 to 90 per cent.
3. They could sell as a going
concern. However, finding a qualified
buyer may be difficult; the cash for
purchase may not be readily available
and the agreement on a fair price may
be difficult to reach.
Alternatively, you could protect
By: Julie Ireton
Last year 92-year-old Dorothea
Torunski dressed up like a hippy
to rock it out.
This year, she’s not giving away
what her costume will be.
“I’m not a spring chicken, but I can
still rock,” she said.
Torunski looks forward to the
Glebe Centre’s annual Rock-a-thon
every spring. For several years this
resident of the long-term care centre
has joined volunteers and staff to rock
the day away – in a rocking chair -- to
raise money for the organization and its
programs.
The 2012 Rock-a-thon and block
party is set to take over Monk Street
(directly behind the Glebe Centre) on
Saturday June 2 between 11 am and 3
pm. Organizers bring out the rocking
then you will receive more money by
deferring the date that you start CPP.
But how can you ever know how long
you will live?
As with many personal financial
planning issues the only answer is “it
depends.” Only you can determine your
personal goals. If you will have enough
income from other sources to provide
your desired retirement lifestyle beyond
your mortality, then CPP becomes a
bonus. Only then can you answer the
question of whether or not to begin CPP
benefits early.
The foregoing is for general
information purposes and is the
opinion of the writer. This information
is not intended to provide personal
advice including, without limitation,
investment, financial, legal, accounting
or tax advice. Please call or write to Rick
Sutherland CLU, CFP, FDS, R.F.P., to
discuss your particular circumstances
or suggest a topic for future articles
at 613-798-2421 or E-mail rick@
invested-interest.ca. Mutual Funds
provided through FundEX Investments
Inc.
your business and family if you chose
business life, disability and critical
illness insurance. These products could
help you and your family carry out your
plans for the business if you were to
become critically ill or die - for example,
life insurance can provide funds to
buy the business under a purchase
agreement, and disability insurance
can provide income if you become
disabled. Critical illness insurance can
help you pay off debts, stabilize your
credit position, offer cash values or loan
options or establish a fund for personal
income at retirement, independent of
the business.
Your advisor can offer you an array
of life, disability and critical illness
insurance products to suit your needs.
Your advisor can help you develop a
solution that best fits your family and
business needs.
Abbotsford @ The Glebe Centre
Good ‘til the Last Rock
chairs, volunteers raise pledges and
members of the community and local
businesses come out to rock and donate
money. But this year will be bitter sweet.
The rocking chairs are coming out to the
street for the last time.
“This is like the series finale,”
explained Karen Joynt the Glebe
Centre’s Manager of Development.
Joynt says the Glebe Centre will look
to other kinds of events to raise money
going forward.
The Rock-a-thon has often had a
theme and this year the theme will be
TV series finales. She expects teams to
dress up as characters of well-known
and loved TV programs that had big
wrap-ups such as M.A.S.H. or the
Golden Girls.
Fifteen years ago the Glebe Centre
Cont’d on next page