40 - Wednesday, October 19, 1988 - North Shore News LOVE THAT inversion. No, I’m not talking about a weather condition, although your temperature might rise if retirement is in your personal forecast. For the inversion I have discovered translates into the hot thrill of some extra cold cash if you retire and take your Canada Pension Plan pension this December instead of next January. ‘An inversion occurs when a benefit coming into pay in a par- ticular year is less than a previous year’s benefit escalated to new year values,’’? explained Tom Stark, Lower Mainland client services manager for Health and Welfare Canada’s income security pro- grams. Umm, yes. The CPP benefit de- pends on various factors, Stark said. An inversion occurs when average wages increase more slow- ly than average prices — a reversal of the historical trend — which we have been experiencing recently. Stark expects the upcoming 1988-89 inversion to be more than four times as great as the inversion we experienced last December- January. “Assuming price inflation for this year runs at four per cent and wages are up 4.4 per cent, a 65- year-old maximum contributor who applies in December and receives the first cheque next January, will receive a monthly CPP pension of $559.03," he told a meeting of the Canadian Association of Pre-retirement Planners, B.C. chapter. “But if that same individual ap- plied in November this year, he or she would receive $543.06 in December and $564.78 in January.” That extra $5.75 a month will be indexed, along with the rest of the pension, so retiring a month early in this case can really pay off. If you retire after age 60 but be- fore 65, you will also profit from inversion, although the difference will be smaller because of the lower pension. On the other hand, if you delay retirement past 65, in- version will produce a larger prof- it. Stark noted the exact inversion amount will depend on the infla- tion figures used, as well as on the individual’s earnings and contribu- tion record. if you ea find abe If you do apply for a reduced CPP benefit before you turn 65, you must have officially quit work as of the end of the month before your pension stasts. However, once you start to receive the peasion, then you can return to work and earn as much as you like. dollars and sense Michael Grenby Forme) If you apply for the CPP pen- sion at age 65 or older, this forced retirement rule does not apply. In all cases, when you receive the CPP pension you may no longer make further CPP con- tributions. Recently changed CPP legisla- tion now allows you to split your CPP pension with your spouse, once you are both entitled to receive the pension. That means a high-tax-bracket spouse could have up to half the pension paid to a low/no-tax-bracket spouse. Although each spouse must split the pension and have part of it paid to the other spouse, even the shift of part of a large CPP pen- sion to a lower-income spouse who returns part of a smaller pension could save tax. Forget this split, you say, because your relationship is split- ting? Then you should know your future CPP pension could be in- creased or decreased when a mar- riage or common-law relationship breaks down. In other words, part of the CPP pension credits one partner accumulates while working could be claimed by the other partner as part of the breakup. Finally — and this has been only a very brief summary of some CPP benefit highlights -- you must ap- ply for all CPP pensions and other benefits: they are not paid automatically. Contact your local income secu- rity program office for leaflets outlining the CPP benefits in more detail. kane Make sure you leave enough time if you need to have any com- pound Series 36 (1981) Canada Savings Bond certificates split to defer some of the interest to another tax year. For example, if you want to cash half of a $10,000 bond on Nov. 1 and half next Jan. 1 because you'll be in a lower tax bracket in 1989, your bond certificates must reach a Bank of Canada agency office be- fore — and I’d suggest well before — close of business Oct. 31. After that, the bank will not split bonds into smaller denominations. You don’t have to declare in this tax year the compound interest — $1,219.91 for every $1,000 CS 36 bond — that becomes payable Nov. 1 provided you haven’t declared any of that interest so far, If holding some or all of those bonds until Jan. 1, 1989, for ex- ample, means you will pay less tax on the interest than if you declared it this year, you could postpone cashing the bonds until then. You would lose the interest that money would earn for two months, but you’d defer and save tax. eee Do you have a financial or con- sumer question for Mike? Or a story you think should be in his column? Please write to Mike Grenby, North Shore News, 1139 Lonsdale, North Vancouver V7M 2H4. Mike cannot reply in- dividuaily but will answer as many of your letters as possible through The North Shore News. Remember to include your phone number in case Mike needs to contact you. lier Term Life insurance Policy, take it. After all, it’s your money. And your life. 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