Financial Planning in Retirement
Financial planning can help you get the most out of your money and reach your goals after you retire. Need help? Find financial planning basics below, and information on OMERS-related issues including tax and your OMERS pension, and survivor benefits.
The Basics
Your financial plan should also examine healthcare, lifestyle, insurance and estate planning issues. Your plan will need to be re-evaluated from time to time to account for major life changes, such as health or marital status.
Tips
Consider consulting an expert, especially if you have doubts about your finances. FP Canada has information about financial planners, their services, qualifications, and how they are paid (e.g., does the planner charge a fee for service or do they receive a commission for selling a particular product).
Think through your plan, write down your goals and create a timetable for them: travel, renovations on your home, paying down debt, buying a new car, or saving for the future? How do you see your life in five or 10 years?
Evaluate your insurance needs to make sure you are not under-insured or over-insured.
Manage credit carefully to keep it from becoming a personal liability. Pay off high-interest debt first (e.g, credit cards), and shop around for credit products.
Know the rules for government programs. For example, income-tested benefits from programs such as the Guaranteed Income Supplement (GIS), the Allowance, and provincial social assistance will take your total income into account, including your OMERS pension.
Investigate tax benefits to take full advantage of all credits and deductions available.
Have a power of attorney in place, so the appointed person can look after your financial affairs or health care decisions if you become unable to. Pension-related issues require a continuing power of attorney for property. OMERS accepts POA to be executed via audio-visual communication technology effective April 7, 2020. Be sure to send OMERS a copy of the power of attorney document that is executed in a valid manner.
Government Benefits
When a spouse or common-law partner dies,you may be entitled to government survivor benefits, as well as children's benefits. You must apply for these benefits through the specific government agency. If you have questions about any of these benefits, please contact the agency directly. OMERS does not have information regarding these benefits.
You may be eligible for survivor benefits from the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP). CPP also offers one-time benefits to help cover funeral expenses (OMERS does not offer this benefit). Information about CPP and the Old Age Security program (OAS), Allowance for the survivorand Guaranteed Income Supplement.
Other resources
Health Canada has a range of information specifically for seniors.
Bereaved Families of Ontario helps people learn to live with grief. The site has links to support groups and chapters across Ontario.
This Ontario government site provides information on the steps to take immediately after someone dies.
Ontario Society (Coalition) of Senior Citizens' Organizations (OCSCO) is an organization with a mission to improve the quality of life for seniors.
Public Health Agency of Canada, Aging and Seniors.
Seniors Canada has information and links to seniors and government websites.
Canada's Association for the Fifty-Plus.
The Ontario Seniors' Secretariat works to improve the quality of life for seniors.
The Canadian Mental Health Association has information about how to find help for emotional distress.
Tax and Your OMERS Pension
Information about income tax and your OMERS pension is valuable.
Be sure to make use of all available tax credits and deductions to help maximize your money. For example:
Once you turn 65, you may be eligible for the federal age tax credit.
As a retiree, you may qualify for HST credits.
When you withdraw income from a RRIF or other plan, keep in mind that this income could impact your eligibility for government programs such as age credits, HST credits, the Guaranteed Income Supplement (GIS) and more. Always check first.
The tax withheld from your OMERS pension is based on your monthly pension payments, your federal and provincial income tax forms (TD1) or country of residence information, and any additional tax you've asked us to withhold.
To update your federal and provincial income tax information, complete and send OMERS the TD1 forms.
Income tax slips (T4A or NR4)
OMERS will send you a tax slip for your OMERS pension (retirement, survivor or disability pension) by the end of February each year. The tax slip is your official proof of income for tax purposes. It shows the total amount of pension paid to you during the previous calendar year and the total tax deducted.
Tax slips are mailed to your principal (home) address.
T4A: If you reside in Canada, we will mail a T4A slip to your home address.
NR4: If you reside outside Canada, we will mail an NR4 slip to your home address.
If you haven't received your tax slip by early March, contact OMERS Member Experience; we will confirm your mailing address and send you another slip.
As a registered myOMERS user, you can reprint your T4A tax slips online.
If part of your pension is paid from the Retirement Compensation Arrangement (RCA), we will send you separate tax slips for the portion paid from the OMERS Primary Plan and for the portion paid from the RCA.
Tax slips for payments to a former spouse
If OMERS pays a portion of your pension directly to your former spouse, we will send the former spouse a tax slip for the amount paid. That amount will not appear on your tax slip, as it's a reduction in your OMERS pension income.
If you have arranged to pay your former spouse yourself (without OMERS involvement), your full OMERS pension income will appear on your tax slip.
Additional income tax deductions
Income tax is deducted from your OMERS pension as required by the CRA. You can also arrange to have OMERS deduct additional tax from your monthly payments. For example, if your total income puts you into a higher tax bracket, increasing the tax at source may help you avoid a big bill at tax time. We recommend discussing your overall tax situation with a tax adviser or the CRA.
To request or to change the additional amount of tax withheld from your monthly pension payments, there are several ways to do so:
Change your tax online at myOMERS.com.
Sign and submit a Changing Information (retired member/survivor) form to OMERS.
Send OMERS a signed letter, with your full name (printed), OMERS reference number (or social insurance number), and the total additional monthly amount you want withheld.
If you receive more than one OMERS pension (e.g., from OMERS Primary Plan and from the RCA) you will need to submit a separate additional tax request for each pension.
Basic personal amount
The basic personal amount is the income threshold at which CRA begins to deduct taxes. This amount is indexed to inflation, based on the Canadian Consumer Price Index (CPI) as reported by Statistics Canada. An increase in the basic personal amount means a greater portion of your pension income is not taxed. Visit the Canada Revenue Agency website at www.cra-arc.gc.ca for the current basic personal amount.
Tax and retro-payments
A retro-payment is likely be taxed at a higher rate than monthly pension payments. The tax on monthly payments is calculated on an annualized basis using a blended tax rate. Each portion of the monthly pension payment is placed into the applicable tax bracket, as set out by the CRA.
Have a look at these sample tax rates:
Tax and Retro Payments: Sample tax rates
10% for annual income up to $30,000
20% for annual income from $30,000 to $60,000
30% for annual income over $60,000
For a $3,000 monthly pension payment ($36,000 annually), a portion is taxed at 10% and a portion is taxed at 20%. A retro-payment of $3,500 would be taxed at 20% because it falls in the $30,000 to $60,000 income range.
When you file your tax return, your total OMERS income, including the retro-payment, is factored in with the tax paid for the year. If your tax paid is in excess of what is required on your income from all sources (e.g., CPP, OAS, RRIFs, etc.), you would get a refund from CRA.
Pension Income Splitting
This Income Tax Act provision allows retired couples to reduce their overall taxes.
A retiree can allocate up to half of their pension income to their lower-income spouse or partner when filing a tax return. This feature is designed to drop the higher-income spouse or partner into a lower tax bracket.
Information and application forms are at the Canada Revenue Agency (CRA) website.
OMERS and income splitting
Your OMERS Plan pension is eligible for pension income splitting.
Retirement compensation arrangement (RCA) benefits – The RCA benefit is eligible for income splitting after age 65 (subject to limits). Before age 65, the RCA benefit is not eligible for income splitting. The RCA is a separate fund that pays benefits over and above the maximum pension that the OMERS Plan is permitted to pay according to the Income Tax Act.
Setting up pension income splitting
Pension income splitting is set up through Canada Revenue Agency (CRA), not through OMERS.
The retired member and the spouse or partner must complete a Form T1032, Joint Election to Split Pension Income.
There is a line on the income tax return for the retired member to deduct the pension amount allocated to their spouse, and one for the spouse to report the allocated pension amount.
Estate Planning
Estate planning covers many different areas, and includes:
making a will and keeping it up-to-date;
looking into strategies to reduce taxes;
considering issues related to insurance policies and personal savings; and
understanding how OMERS survivor benefits fit into the picture.
Your will
A will is a legal document designating the distribution of your property and assets after you die. The person you appoint to carry out your wishes on your behalf (an executor) is also stated in the will.
A will provides instructions for how you want your assets (funds, property and personal effects) to be distributed after your death. It's the simplest way to ensure that your wishes are carried out.
If you die without a will (intestate), the courts will appoint an administrator to dispose of your assets according to rules in effect at the time of your death. This means the law decides how and who will receive your assets, regardless of your wishes or the needs of your family.
Do-it-yourself kits for wills are available, but if it doesn't comply with Ontario law, the will may be invalid.
It's a good idea to consult a lawyer who is experienced in estate law to prepare your will for you.
Review your will periodically to be sure it still reflects your wishes and financial situation.
Other methods of transferring your assets
Although a will is central to any estate plan, other methods of transferring your assets include:
1. Testamentary trust
A testamentary trust lets you transfer assets to beneficiaries, but the beneficiaries will not have control of the assets. Instead, the assets are controlled and managed by a trustee.
The creation of the trust is set out in the will.
2. Joint ownership
This form of ownership allows two or more people to own an asset together.
On the death of one of the owners:
ownership automatically passes to the surviving owners (joint tenancy); or
part of the asset owned by the deceased is transferred according to their will (tenancy-in-common).
3. Gifting assets before death
Gifting assets prior to death has a number of potential tax benefits and tax liabilities. For example, gifting can reduce estate administration taxes on your estate.
Also, by gifting you hand over all control of the asset.
4. Living/family trusts
Trusts have a wide application in estate planning, but can be a complex method of estate transfer.
A living trust is a relationship created during the trustee’s (the person who owns the assets) lifetime. A testamentary trust is created on the death of an individual.
Two of the many ways to use a trust include safeguarding assets if the beneficiaries are deemed incapable (due to young age, mental disability, or lack of business experience); or to provide for a child’s education.
It’s a good idea to consult a lawyer who is familiar with trust documents and estate planning.
OMERS survivor pension
Knowing how OMERS survivor benefits work is an important part of estate planning.
OMERS survivor pension:
is indexed to inflation; and
the spousal pension is paid for life, even if the surviving spouse remarries.
An eligible spouse will receive 66 2/3 of the lifetime pension you were receiving (or were entitled to receive) at the date of death, plus an additional amount for each eligible child.
If there is no eligible spouse, a retired member's eligible children, named beneficiary or estate may be eligible for a benefit.
OMERS entitlement to the survivor benefit is legislated; a will cannot change it.
The definition of an eligible spouse is also legislated. Know the rules, particularly if your marital status has changed since retiring.
More about OMERS Survivor Benefits