Your CPP questions answered: If you’re receiving survivor benefits, is there a good time to take your own CPP?

February 20, 2024

As part of this ongoing series, we invite readers to ask questions about their Canada Pension Plan (CPP) retirement benefits and find experts to answer them. This week, we asked Kevin Burkett, tax partner at Burkett & Co. Chartered Professional Accountants in Victoria, to answer some questions about survivor benefits:

What’s the difference between a death benefit and a survivor benefit?

The death benefit applies in cases in which the deceased made contributions to the CPP that meet certain requirements around years of contributions. It’s a one-time payment of $2,500 that can be applied for immediately after the contributor’s death, paid to their estate or, in cases in which there’s no estate, it can go to the person paying for funeral expenses, the surviving spouse or the next-of-kin, in that order.

The survivor’s pension is a monthly pension paid to the surviving spouse or common-law partner and, in cases in which the survivor is 65 or older, results in a 60 per cent entitlement. If the surviving spouse is under 65, they receive a base amount of $227.58 per month, which is the flat rate portion for 2024, plus 37.5 per cent of the deceased contributor’s retirement pension entitlement. Note that if the surviving spouse is already receiving a CPP retirement pension, the total of these amounts is limited to certain thresholds.

If you are receiving survivor benefits, is there a good time to take your own CPP? I was 62 when my husband passed away and I started receiving survivor benefits then. I tried to research the best time for me to take my own CPP, and it’s all very confusing. No one seems to have a good, clear answer.

It is very confusing. The best choice will depend on your specific situation. In addition to all the usual considerations of when to start your own retirement pension, you need to be aware of the overall limit for someone receiving a combined survivor’s and retirement pension. In some cases, if this limitation affects you, it may be best to defer receiving your own retirement benefit to obtain the increased retirement entitlement at 70. If you call Service Canada, a representative can provide you with the exact numbers of your combined survivor pension and retirement benefit if you decide to start now. You could then compare this to the option of allowing your retirement pension to grow by deferring it.

Can you tell me what the CPP maximum combined survivor and retirement pension is if the deceased or the survivor starts collecting at 70? Also, what is the impact if both spouses are over 65 and neither is collecting when one of them passes away?

The 2024 maximum combined survivor’s and retirement pension, as shown on the Service Canada website, is $1,375.41. This limit is for a surviving spouse who starts their own retirement pension at 65. If the surviving spouse defers their CPP benefits until 70, this limit is increased by 42 per cent. If both spouses are over 65, and neither is collecting the CPP when one of them passes away, the surviving spouse’s combined survivor and retirement pension will be subject to the maximum limit at that time, after taking into account the 0.7 per cent per month increase that applies by deferring the start of the retirement pension after 65.

Why the FHSA isn’t just a homeownership game-changer

July 26, 2023

The First Home Savings Account has been open to Canadians for a few months, and it’s already gaining traction among young Canadians eager to jumpstart their own homeownership journey. But according to two experts, the newest registered savings plan on the block raises some other interesting planning possibilities.

“This works like an RRSP, because you’re able to claim income tax deductions on contributions you make into the account,” says Mark Halpern, CEO at WEALTHInsurance.com (pictured above, left). “It also works like a TFSA in that qualifying deposits grow tax-free and withdrawals you make from the FHSA are tax-free.”

In the months before FHSAs were introduced, Kevin Burkett, portfolio manager at Burkett Asset Management, did a podcast based on preliminary information from the federal government.

“I think now we’re seeing other interesting planning possibilities based on allowable transfers between FHSAs and other registered plans,” Burkett (above, right) says.

Starting from when they first set up their FHSA, an aspiring Canadian homeowner has 15 years to purchase a home. If they end up not using the money in their FHSA by then, they can consider a few options. One option, according to Burkett, is to transfer the balance into their RRSP.

“That creates some opportunities for folks who may not even be considering a home purchase to use the FHSA to boost the room in their RRSP, because I don’t believe that transfer from your FHSA into your RRSP counts against your RRSP room,” he says. “So let’s say you’re a young 22-year-old professional trying to decide between an RRSP and a first home savings account, I think the FHSA is your best option in almost every case.”

When someone makes a withdrawal from their RRSP accounts, Burkett says, every dollar withdrawn is counted as taxable income. But with the FHSA, Canadians can avoid that penalty by instead transferring funds from their RRSP to their FHSA, which are not subject to income inclusion.

“If you transfer $40,000 to the FHSA first, you’ll then have the opportunity to draw out for that home purchase without paying any tax on the RRSP balance,” he says.

“There’s also a loan mechanism for RRSP holders to withdraw from their RRSP for a home purchase through the Home Buyers’ Plan,” Burkett says. “The First-Time Home Savings Account, in my opinion, is far superior to the Home Buyers Plan, in terms of its ability to get you a down payment on a nice home.”

While many older Canadians may make plans to leave a portion of their wealth as a legacy to help future generations, the FHSA also creates a fresh opportunity for those who want to make a generous gift to help their family today while they are alive.

“Parents or grandparents could gift $8,000 to their grandchild. If it’s in cash, there’s no taxable attribution on the gift, so it won’t come back to bite them,” he says. “If the adult child then makes an $8,000 contribution to their FHSA, they get an RRSP-type receipt, which helps them save around $4,000 in taxes. That money will now grow tax-free.”

As Halpern notes, FHSA owners can put in a maximum of $40,000 in their accounts and have the money professionally invested. That means down the line, two young Canadians who’ve been making FHSA contributions with their parents’ or grandparents’ help and also have their RRSPs and TFSAs running could potentially make a strong first step toward owning a home together by the time they get married.

“Imagine a new couple each have an FHSA and have each maxed out their contribution room, and their accounts have grown to $80,000 apiece,” he says. “Through the Home Buyers’ Plan, each spouse can take a $35,000 tax-free withdrawal from their RRSP. So they’ll potentially be able to put down a downpayment of $230,000 or more.”

While Burkett mostly works with older, wealthier clients who are ineligible to use FHSAs, he says he would readily advise young Canadians to use them.

“If I did meet a new client, a young person unsure on a home purchase, I would be recommending a First Home Savings Account regardless of intention,” he says.