Q&A: Concerned about having too much money

Question: I’m in a bit of an unusual situation. I’m 54 and have been retired for
a year. I have an adequate, fully funded and indexed defined benefit work pension
which covers my expenses and part of my discretionary spending. I have around
$200,000 in my RRSP and around $500,000 in cash and equities in my non-registered
account. I also have a fully paid for new house and vehicle in order to minimize
short-term expenses. I’m divorced with no dependents and have left my entire estate
to charity in a bequest.

I’m looking for direction about how to maximize my income and minimize my tax
exposure now and when my estate is passed along to charity. I’m planning on
taking CPP at age 60 and am concerned about having too much income later in
life with OAS clawbacks. – Fred L.

Gordon Pape answers: You need to sit down with a financial
planner to work out the precise details of how best to organize your affairs.
However, let me make a couple of general observations.

First, since you are already retired applying for CPP at age 60 makes sense
even though it appears you won’t actually need the extra money at that
point. The reason ishat if you wait until 65 you will add five more years
of zero employment income which will have the effect of reducing the amount
of your pension entitlement, under the CPP’s complicated calculation system.
However, if you decide to go back to work you may wish to reconsider this time
frame.

Second, millions of people would love to share your worry about “having
too much income later in life”. If that’s how things work out, the Old
Age Security clawback should be the least of your worries. Certainly, I would
not be concerned about it at this stage. This year’s OAS income threshold is
net income of $62,144. Since it is indexed to inflation, let’s assume that increases
by 2 per cent a year. By the time you reach 65, the threshold will be around
$77,000. If your income is higher than that, you’ll be well off indeed.

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