Welcome to the Money Bag, where I answer questions and address comments from readers on a wide range of money topics, myths, and perceptions about money. No question is off limits, so hit me up in the comments section or send me an email about any money topic that’s on your mind.
Today, I’m answering reader questions about borrowing to invest, optimizing your RRSP, market timing, the reluctance to spend in retirement, and switching from dividend stocks to index funds.
First up is Andrea, whose financial advisor is trying to talk her into setting up an investment loan. Take it away, Andrea!
Should I borrow to invest?
My advisor suggested using a HELOC, paying only the interest, and using the rest to invest (obviously in hopes of gaining a higher return than the cost of the HELOC interest). Do you think this is a wise idea?
Hi Andrea, I’ve recently helped several clients extract themselves from unnecessary investment loans. It’s one of those ideas that looks good on paper but is not so great in real life.
Interest is tax deductible, yes. But that’s a one-time savings when you file your taxes. You still need to service the loan interest each month.
What are you investing in? It should be high enough exposure to equities to give you a higher expected investment return than the loan interest, but not too risky (betting on individual stocks) and not too expensive (what kind of fees are you paying to your advisor?).
Stocks can fall sharply (34% in March 2020, or down 12-18% in 2022 depending on the index).
How would you feel about a $140,000 market value when your loan is $200,000?
Investment loans are great for investment advisors because they get a loan on the books and an investment to manage (from which to extract fees).
Finally, are your other goals being fulfilled (optimize RRSP, maximize TFSA, prioritizing other goals like living your best life)?
All more important than creating a tax deductible investment loan.
What does it mean to optimize your RRSP?
Next up is Tim, who wanted clarification on my suggested way to optimize your RRSP contributions when you have an employer matching RRSP.
In a recent Weekend Reading edition, you suggest to ”contribute enough to max out the match, but no more” when it comes to employer matching savings plans. Why not contribute more?
Let’s say someone earns $100,000 per year and can contribute 18% of his income to RRSPs. At work, five percent would come from the employee and five percent would come from the employer’s match, for a total of 10%. But what about the remaining eight percent? Why not maxing out the RRSP with the employer only? What are the cons with this approach?
Hi Tim, the answer is a bit nuanced. First of all, it might make sense to contribute the extra 8% but I would only do that in the context of my next point, which is to “optimize” your RRSP within your marginal tax bracket. Take the free money with the match, yes, but the extra contribution is either warranted or not. If not, maybe TFSA makes more sense.
If it does make sense to contribute more to the RRSP, my point is that most people should do that in a personal RRSP that is not tied to the group plan. Remember the group plan often limits its members to a narrow menu of investment options, which most of the time will be higher fees than an ETF that you can buy on your own.
So, the idea is that you’ll take the free money and max out your employer matching plans, then possibly contribute more to your RRSP, but do that in a personal RRSP and invest in lower cost ETFs.
Is a market crash coming?
Next, we have Adam who is feeling nervous about a post-election market crash and wants to know what to do about it.
Hi Robb: I keep reading about the impending market downturn after the election glee is over.
That said, since my wonderful foray into VEQT (with your encouragement,) should I be taking steps to secure my portfolio by moving say half of VEQT to a more balanced fund? Will you be writing about this in the near future?
Hi Adam, you’ll find no shortage of opinions on when the market is going to crash (and how bad). Whether it’s the election, or aftermath, or the next big thing that people are nervous about there will always be a reason for panicky investors to sell.
Your investing strategy should not change based on market conditions.
Meaning, if you are investing for the long haul and are in an asset mix that you’re comfortable with, then stay the course and ignore punditry and short-term price fluctuations.
Moving half of your VEQT into VBAL just creates VGRO (an 80/20 portfolio). If an 80/20 portfolio allows you to more comfortably stay in your seat then that might be a prudent move.
Just know that if VGRO existed during the great financial crisis it would have fallen 33.89% from June 2007 to March 2009 (45 months). So it’s not like 80% stocks is substantially less risky than 100% stocks (which fell 42.06% during that same time period).
Finally, know that the US market is not THE entire global market. It’s why you’re invested in VEQT (14,000+ global stocks) and not VFV (500 US large cap stocks). You’re taking risk, but you’re diversifying that risk around the world.
Stocks will absolutely fall at some point. But they’ll also recover eventually and make new all-time highs. That’s the nature of investing.
Market timing is a great way to end up poorer and drive yourself mad.
Why don’t retirees spend their money?
Next we have Darlene, who wants to know why retirees are so reluctant to spend their money.
Hi Robb, you mention retirees don’t spend up to their capacity. What’s driving this reluctance to spend down to zero, and what are they holding on to the money for? And do they really need to spend to zero?
Hi Darlene, the reluctance to spend comes from a fear of running out of money, either from a bad market crash, higher than normal inflation, high expenses on healthcare as they age, or from a higher-than-normal life expectancy.
A good retirement plan can help alleviate those fears, showing a range of outcomes using conservative assumptions on spending, inflation, longevity, and rates of return.
I don’t think anyone should be planning to truly die with zero – you need a margin of safety – but in my experience most retirees are not spending nearly up to their capacity due to the above fears and concerns.
I like to give my retired clients a spending range. A comfortable spending floor (typically what they’re spending now) that they could easily stick to in good times or bad, and then a safe spending ceiling that they could spend up to if desired without worrying about running out of money.
Related: Putting together your retirement income puzzle pieces
That range might look like an annual spending floor of $60,000 after-taxes, and an annual safe spending ceiling of $72,000. In reality, the sweet spot might be somewhere in the middle at $66,000, giving them a bit more spending capacity to enjoy retirement without causing too much anxiety that they’re overspending.
From dividend stocks to index funds: When to pull the trigger?
Finally, here’s a question from Jean about switching from dividend stocks to index funds.
I’ve been a successful dividend investor for about 20 years now and have been thinking of switching to indexing for a while. One of the main reasons for me to switch is that I’m getting older and losing the patience to manage my portfolio. Also, my family is not into it at all, so teaching them indexing would be much easier.
I have a pretty good idea what my final indexing strategy will look like. Something like VEQT with sprinkles of VCE/VV. Quite basic and simple!
My dilemma now is how to accomplish the transition? When and how do I pull the trigger?
Setting a date and doing it all at once seems to be the play like you did. But then, how do my manage my holdings till then? I’ve always had a long term approach and managing till the switch would be a pretty short term thing, hence a great part of my dilemma.
Any thoughts on all of that?
Hi Jean, you’ve listed some pretty compelling reasons to make the switch to indexing. As fun and interesting as it can be to manage your own stock portfolio, in my experience the juice is just not worth the squeeze anymore now that you can buy a single global index fund for the low price of 0.20% and get market returns without any effort.
No need for sprinkles, either. VEQT (or XEQT) has everything you need. Don’t overthink it!
Jean, this is a bit like getting into a cold pool or lake. Best to just jump in at once rather than stress about it and inch your way in.
Think of your portfolio as if it’s in cash right now. Would you buy all of your individual stocks again, or would you just buy your index fund?
Because that’s the exact same thing as selling all of your stocks at once and then immediately buying your ETF. You’re out of the market for a hot minute, and right back in with a globally diversified fund (minus some transaction fees, depending on your brokerage platform).
Pick a day – why not Monday at noon? The market is open, you can sell all of your stocks, and immediately buy your ETF. Done. No need to manage anything in the short term.
This is not like timing the market or anything. If you’re going to do it, best to get it over with and do it right away.
My only caveat to all of that is if you have large unrealized capital gains in a taxable account. More careful consideration needs to be taken there, likely with a financial planner or tax professional. I’ve worked with clients to sell their taxable holdings over a period of 2-3 years to spread out the capital gains hit.
There are no tax implications at all for selling stocks inside your registered accounts (RRSP, TFSA, and LIRA).
Do you have a money-related question for me? Hit me up in the comments below or send me an email.
Old Age Security (OAS) is a government program in Canada that provides a basic income to eligible seniors who have reached the age of 65. It is one of the three main pillars of Canada’s retirement income system, along with the Canada Pension Plan and personal savings.
Eligibility for OAS is based on several factors, including age, residency, and income. To receive OAS payments, you must be 65 years of age or older and have lived in Canada for at least 10 years after the age of 18.
OAS is considered taxable income. As of January 2025, the OAS maximum payments from age 65 to 74 is $727.67 per month ($8,732.04 per year), and $800.44 per month ($9,605.28 per year) for those ages 75 and older.
The amount of OAS you receive is based on how long you’ve lived in Canada after the age of 18. If you have lived in Canada for less than 40 years, you may receive a partial pension. For instance, if you lived in Canada for 35 out of the 40 eligible years you would be entitled to receive 87.5% of the OAS maximum payment (35 divided by 40).
The amount you receive may be reduced if your income exceeds a certain threshold, which is $90,997 for the income year 2024. If your income exceeds this amount, your OAS payment will be reduced by 15 cents for every dollar of income above the threshold. This OAS “recovery tax” period takes place the following year (July 2025 to June 2026).
Since July 2013, most eligible seniors are automatically enrolled to receive OAS starting at age 65. The government determines your eligibility the month after you turn 64. If eligible, you will be notified of your automatic enrolment beginning at age 65. That means, if you are still working or simply plan to defer taking your OAS benefits to age 66 to 70, you should contact Service Canada to declare your voluntary deferral.
Otherwise, to apply for OAS, you must complete an application form and provide proof of age and residency. You can apply up to 11 months before you turn 65, and you should receive your first payment within three months of your application being approved.
To apply online you’ll need a My Service Canada Account (MSCA).
In addition to OAS, there are other government programs that may be available to eligible seniors, including the Guaranteed Income Supplement, the Allowance for Spouses, and the Allowance for Survivors. These programs provide additional income to low-income seniors and their spouses or survivors.
Overall, Old Age Security is an important program that provides a basic income to eligible seniors in Canada. While the amount of OAS you receive may vary based on your income and residency, it can provide a valuable source of income in retirement. If you are approaching the age of 65, it is important to consider your eligibility for OAS and other government programs that may be available to you.
Deferring OAS to age 70
Deferring Old Age Security to age 70 is an option for Canadian seniors who have the financial capacity to do so. By delaying your OAS payments, you can increase the amount you receive each month.
For each month that you delay your OAS beyond age 65, your pension will increase by 0.6%, up to a maximum increase of 36% if you delay OAS until age 70. This means that if you delay your OAS for five years, you will receive 36% more per month than you would if you started collecting at age 65.
However, it is important to carefully consider whether delaying your OAS is the right choice for you. If you have a shorter life expectancy or if you need the money to cover your living expenses, it may be better to start collecting your OAS at age 65.
Additionally, delaying your OAS may affect your eligibility for other government programs that are based on your income. For example, if you delay your OAS and receive a higher pension at age 70, your income may be higher and you may no longer be eligible for certain programs, such as the Guaranteed Income Supplement.
Overall, delaying your OAS to age 70 is an option that can provide a higher monthly pension, but it may not be the right choice for everyone.
OAS Payment Dates 2025
The OAS payment dates for 2025 are:
- January 29, 2025
- February 26, 2025
- March 27, 2025
- April 28, 2025
- May 28, 2025
- June 26, 2025
- July 29, 2025
- August 27, 2025
- September 25, 2025
- October 29, 2025
- November 26, 2025
- December 22, 2025
Payment dates may vary depending on your payment method. If you receive your OAS payments by direct deposit, it should be deposited into your account on the payment date. If you receive your payment by cheque, it may take a few additional days to arrive by mail.
OAS is Indexed to Inflation
While Canadians can expect their CPP payments to increase annually based on the previous year’s Consumer Price Index, OAS recipients have their benefits adjusted quarterly to provide better protection against unexpected sharp increases in prices over the year.
The quarterly inflation adjustment for OAS benefits is based on the difference between the average CPI for two periods of three months each:
- the most recent three-month period for which CPI is available, and
- the last three-month period where a CPI increase led to an increase in OAS benefit amounts.
OAS payments remained unchanged for the first quarter of 2025, as the CPI did not increase over the previous 3-month period.
OAS Payments Increase at age 75
In July 2022, the Canadian government announced an increase to the OAS pension for seniors aged 75 or older. Starting in July 2022, the OAS pension for seniors aged 75 or older was automatically and permanently increased by 10%.
If you turned 75 after July 1, 2022 you will receive the increase in the month following your 75th birthday.
The 10% increase in the maximum OAS pension rate will not affect the calculation of your Guaranteed Income Supplement (GIS).
The increase to the OAS pension for seniors aged 75 or older is in recognition of the increased costs and challenges that seniors face as they age. The government hopes that this increase will provide additional support to seniors and help them maintain a good standard of living in their later years.
OAS Clawback Threshold
The Old Age Security (OAS) clawback threshold is the income level at which your OAS payments will be reduced or “clawed back”. The OAS clawback is designed to ensure that OAS payments are targeted to those who need them the most, by reducing or eliminating payments for those with higher income levels.
The OAS clawback threshold for the income year 2024 is $90,997. This means that if your net income (which includes income from all sources, such as employment, pensions, investments, etc.) exceeds this amount, your OAS payments will be reduced by 15 cents for every dollar of income above the threshold.
For example, if your net income was $95,997 in 2024, which is $5,000 above the clawback threshold, your future OAS payments will be clawed back by $750 (15% of $5,000). This “recovery tax” period takes place from July 2025 to June 2026.
If your net income exceeds $148,451 in 2024, your OAS payments will be fully clawed-back during the OAS recovery tax period the following year (July to June).
The timing and mechanics of this is important to note.
Let’s say you applied for OAS benefits upon turning 65 in June 2024. You earned $150,000 in 2024 due to a variety of income sources, including capital gains from the sale of a rental property. You file your 2024 taxes in April 2025 and CRA determines that your taxable income that year has exceeded the OAS clawback threshold.
Meanwhile, you’ve been receiving OAS payments monthly since July 2024. You won’t get a bill to repay the approximate $8,732 you received in OAS benefits between July 2024 and June 2025. Instead, your repayment amount is deducted from your ongoing OAS payments as a recovery tax starting in July 2025.
You will receive a letter informing you of any recovery tax deductions being withheld from your OAS pension payments.
*Changes in OAS Eligibility (not happening)*
Back in 2015, the federal government led by Stephen Harper proposed changes to OAS eligibility – increasing the age of eligibility from 65 to 67. This would have gone into effect as of April 1, 2023 and be fully implemented by January, 2029.
This proposal was quickly repealed when the federal Liberal government was elected in 2015. It’s not happening, folks.
You can continue to apply for OAS benefits and receive them starting at age 65.
Final Thoughts
OAS is a complicated system but one that is critical to retirement planning for many Canadians. It’s important to understand how much OAS you can expect to receive in retirement, and when you plan to take your OAS benefits (between ages 65 to 70) to maximize your income and minimize any clawbacks.
Speaking of clawbacks, it’s also important to understand that OAS benefits are means-tested, meaning once your income rises above a certain threshold your benefits will be clawed-back by 15 cents for every dollar above that threshold. In some cases, OAS benefits may be completely clawed back.
It’s important to work with a financial planner who can help you understand how the timing of retirement, crystallizing capital gains, and withdrawing from an RRSP or RRIF can impact when you should take your OAS benefits and whether your benefits will be clawed back.
It’s also important to note the advantage of pension income splitting with a spouse (for defined benefit pension income and RRIF / LIF income at age 65 and beyond), and how this helps avoid OAS clawbacks in many cases.
OAS payments are indexed to inflation and benefits are adjusted quarterly to keep pace with inflation (versus CPP, which is adjusted annually in January).
Will you take your OAS at age 65, or do you plan on deferring OAS to age 70? Do you have strategies in place based on retirement, capital gains, RRSP/RRIF withdrawals, that will impact when you decide to take OAS?
Canada Pension Plan (CPP) benefits can make up a key portion of your income in retirement. Individuals receiving the maximum CPP payments at age 65 can expect to collect $17,196 per year ($1,433 per month) in benefits.
The amount of your CPP payments depends on two factors: how much you contributed, and how long you made contributions between ages 18 and 65. Most don’t receive the maximum benefit. In fact, the average amount for new CPP beneficiaries is just $9,697.68 per year (as of January 2025).
CPP Payments 2025
The table below shows the monthly maximum CPP payment amounts for 2025, along with the average amount for new beneficiaries:
Type of pension or benefit | Average amount for new CPP beneficiaries (Jan 2025) | Maximum payment amount (2025) | ||
---|---|---|---|---|
Retirement pension (at age 65) | $808.14 | $1,433.00 | ||
Disability benefit | $1,538.67 | $1,673.24 | ||
Survivor's pension - younger than 65 | $527.91 | $770.88 | ||
Survivor's pension - 65 and older | $325.64 | $859.80 | ||
Death benefit (one-time payment) | $2,500 | $2,500 | ||
Combined benefits | ||||
Combined survivor's and retirement pension (at age 65) | $1,017.67 | $1,449.53 | ||
Combined survivor's pension and disability benefit | $1,293.81 | $1,683.57 |
Now, you may not have a hot clue how much CPP you will receive in retirement, and that’s okay.
The good news is that the government does this calculation for you on an ongoing basis. This means that you can find out how much money the government would give you today, if you were already eligible to receive CPP.
This information is available on your Canada Pension Plan Statement of Contribution. You can get your Statement of Contribution by logging into your My Service Canada Account, which – if you bank online with any of the major banks – is immediate.
Related: CRA My Account – How to check your tax information online
If you’d prefer to send your personal information by mail you can request a paper copy of your Statement of Contribution sent to you by calling 1.877.454.4051, or by printing out an Application for a Statement of Contributions from the Service Canada Website.
Note that the information available to you on your CPP Statement of Contribution may not reflect your actual CPP payments. That’s because it doesn’t factor in several variables that might affect the amount you’re entitled to receive (such as the child-rearing drop-out provision).
The statement also assumes that you’re 65 today, which means that later years of higher or lower income that will affect the average lifetime earnings upon which your pension is based aren’t taken into consideration.
CPP is Indexed to Inflation
Canada Pension Plan (CPP) rate increases are calculated once a year using the Consumer Price Index (CPI) All-Items Index. The increases come into effect each January, and are legislated so that benefits keep up with the cost of living. The rate increase is the percentage change from one 12-month period to the previous 12-month period.
CPP payments were increased by 2.7% in January 2025, based on the average CPI from November 2023 to October 2024, divided by the average CPI from November 2022 to October 2023.
Note that if cost of living decreased over the 12-month period, the CPP payment amounts would not decrease, they’d stay at the same level as the previous year.
CPP Payment Dates
CPP payment dates are scheduled on a recurring basis a few days before the end of the month. This includes the CPP retirement pension and disability, children’s and survivor benefits. If you have signed up for direct deposit, payments will be automatically deposited in your bank account on these dates:
All CPP payment dates 2025
- January 29, 2025
- February 26, 2025
- March 27, 2025
- April 28, 2025
- May 28, 2025
- June 26, 2025
- July 29, 2025
- August 27, 2025
- September 25, 2025
- October 29, 2025
- November 26, 2025
- December 22, 2025
Why Don’t I Receive The CPP Maximum?
Only about 6% of CPP recipients receive the maximum payment amount, according to Employment and Social Development Canada. The average recipient receives about 56% of the CPP maximum. With that in mind, it’s best to lower your CPP expectations when calculating your potential retirement income.
Why don’t more people receive the maximum? Well, because it requires 39 years of CPP contributions at the maximum level to get the biggest possible benefit in retirement. That means you need a salary that meets or exceeds the yearly maximum annual pensionable earnings threshold, which in 2025 is $71,300.
Note that there is a new Year’s Additional Maximum Pensionable Earnings (YAMPE) as part of the enhanced CPP that is being phased in over two years. This means Canadians will pay an additional 4% on the earnings between $71,300 to $81,200.
- Year YMPE
- 2025 $71,300
- 2024 $68,500
- 2023 $66,600
- 2022 $64,900
- 2021 $61,600
- 2020 $58,700
- 2019 $57,400
- 2018 $55,900
- 2017 $55,300
- 2016 $54,900
Plenty of variables affect your ability to earn the maximum CPP benefits. Maybe you joined the work force late, dropped out for a period of time, or retired early.
Related: When Should Early Retirees Take CPP?
Low income earners may not hit the YMPE level often enough to get the highest possible CPP retirement benefit. Business owners who choose to pay themselves dividends don’t need to contribute to CPP, but that means they won’t be eligible to receive benefits either.
When To Take CPP?
Perhaps the most common question about CPP is when to take it. The standard age to take CPP is at age 65. But, Service Canada may proactively send out a notice a few months before your 60th birthday advising you that you’re eligible to apply for CPP and giving you an estimate of your expected CPP payments.
You can take a reduced CPP payment starting as early as age 60. If you do elect to take CPP early, you’ll receive 0.6% less for every month you receive it before age 65. That means, for those taking CPP at age 60, a reduction in their CPP payments by 36%. Reductions aside, there could be good reasons to take CPP early – namely if you need the income sooner than 65, or if you expect to have a reduced life expectancy.
Conversely, you can enhance your CPP payments by deferring your pension up until age 70. The advantage of waiting is you’ll receive a 0.7% increase for every month you defer CPP past age 65. Taking CPP at age 70 results in a 42% enhancement to your pension. The biggest reason to defer CPP is to protect against longevity risk – the risk of outliving your money. The trade-off is using your own personal savings to tide you over until the enhanced CPP payments kick-in later in life.
Note there is no benefit to defer CPP beyond age 70, so get your CPP application in on time to avoid delays.
Final Summary
CPP is a complicated system but one that is crucial to retirement planning for many Canadians. It’s important to understand how much CPP you will receive in retirement, and to know how difficult it is to receive the maximum CPP payments. Most CPP beneficiaries receive much less than the maximum, with the average between 55% and 60% – so that’s good to know going into your retirement income planning.
You can find out an estimate of your CPP benefits by looking at your Statement of Contribution online at your My Service Canada Account, or request a paper copy by calling Service Canada.
CPP payments are indexed to inflation, with the latest increase going up by 4.8% in 2024. CPP payment dates are scheduled toward the end of every month and automatically deposited into your bank.
Finally, a big consideration is when to take CPP and how the payments fit into your retirement plan. Do you expect to live a long life? Will you work until age 65? Do you have sufficient personal savings to last until your CPP payments kick-in? Will you take CPP at age 65, or elect to take your pension earlier or later?
Readers: How does CPP fit into your retirement income plan?