Scenario 4:  Seniors Without TFSAs

Robert and Jackie are contemplating retirement.  Robert is 65, earns $55,000 from employment and also receives a $24,000 pension.

Robert and Jackie are contemplating retirement.  Robert is 65, earns $55,000 from employment and also receives a $24,000 pension.  He has not started to receive OAS or CPP but is contemplating retirement at age 67.  Jackie is 62 and earns $45,000 employment income.  Jackie has accumulated $150,000 in her RRSP.  Both Robert and Jackie have no TFSA contribution room.

Will Robert and Jackie be better off in 2015 than in 2014?

This couple derived no benefit from the Family Tax Cuts announced in October 2014.

Indexation of the tax brackets and personal amounts will result in slight reductions in taxes payable by both Robert and Jackie unless their income levels increase.  Robert’s contributions to CPP and his EI premiums will increase due to increases in the maximum pensionable and insurable earnings.

As the couple has no TFSA contribution room, they have been making the maximum contributions under the old limit so they will benefit from being able to contribute more.  In the long term, the increased TFSA contribution room may help Jackie shelter earnings on RRIF minimum withdrawals if they money is not needed to fund their lifestyle.

The decrease in minimum RRIF withdrawals may help Jackie to plan her RRIF melt-down strategy once she reaches age 72.

If this couple is philanthropically inclined and have real estate such as a cottage that has increased in value, they could benefit from the new rules allowing the proceeds from real estate to be donated to charity in order to reduce capital gains tax.

Since both Robert and Jackie are currently working, they are not likely to be benefit from the new Home Accessibility Tax Credit in the short term. Should either develop mobility issues, they may be able to modify their home to accommodate their mobility issues while getting a 15% tax credit for the first $10,000 of their expenditures.