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Canadian MoneySaver magazine has provided Canadians with balanced insight into personal-finance issues since 1981. Through an exclusive arrangement
with The Costco Connection, Canadian MoneySaver’s experts provide Costco members with answers to their questions about financial issues.
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Selected questions are answered
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The opinions of the experts may not
apply to Quebec residents.
Take it, or wait?
I am considering taking my Canada
Pension Plan (CPP) benefits early, at age
60. Both my husband and I would be
eligible for full CPP if we waited until
age 65. I understand that you can never
receive more than the maximum CPP
even if a spouse dies. In other words, if
I wait until age 65 and take the maximum CPP, then I cannot receive a CPP
benefit from my husband if he predeceases me. Does this change if I take
a reduced CPP at age 60 instead, and, if
so, how will this be calculated?
J.G., Vancouver, BC
With CPP, the survivor benefit is designed
to provide help, not provide an additional
income. This is why the CPP survivor benefit
is capped at the maximum of one full benefit.
The most that can be paid to someone who is
eligible for both the CPP retirement pension
and the CPP survivor’s pension is the maximum retirement pension (which is more than
the maximum survivor’s pension by itself).
First, CPP calculates how much the contributor’s CPP retirement pension is at the
time of death. The total amount of combined
CPP benefits paid is adjusted based on the
survivor’s age at the time of the contributor’s
death; how much and for how long the
deceased paid into the plan; and the contributor’s age when he or she died.
Note that if you are widowed more than
once, you are entitled to only one survivor
pension. Also, with the survivor benefit, you
must apply in order to get this additional benefit; CPP is not proactive when it comes to the
death of a spouse.
Many people will argue that this is a good
reason to start taking CPP early. However, I am
a believer if you’re healthy and anticipate living
a long life, it may be worth the wait. Remember,
someone who is 65 today has a good chance of
living for another 20 years or so.
Shelley Johnston, Investment Planning
Counsel, Whitby, ON
I am looking for an exchange-traded fund
(ETF) on the S&P 500, or, better yet, a U.S.
dividend-style ETF. Is there one where
the return is not just index appreciation
but also flows through the dividends
to the units? It is for a non-registered
account. Are the dividends taxed separately for Canadians or is there a TSX-listed ETF that comprises both (index
return with dividends) and is considered
Canadian for tax purposes?
B.M., Toronto, ON
The recent dividend yield of the S&P 500
Index is just below 2. 5 per cent, so any ETF or
cheap index fund tracking the S&P 500 will
include dividends as part of its total return to
investors. BMO, iShares and Vanguard all
offer TSX-traded ETFs tracking the S&P 500
with annual fees south of 0.2 per cent.
For a more dividend-tilted U.S. equity
ETF, my favourite trades in the U.S. under the
symbol VIG: Vanguard Dividend Appreciation ETF, which tracks the NASDAQ U.S.
Dividend Achievers Select Index. It sports a
0.13 per cent expense ratio and emphasizes
dividend growth over yield.
Canadians with a net worth of around
US$5 million or more will want to avoid U.S.-domiciled ETFs because of potential exposure to U.S. estate taxes in the event of death.
Otherwise, there are great choices from U.S.
Any ETF that trades on the TSX is
considered a Canadian-domiciled
entity for tax purposes. In non-
registered accounts, taxes
companies are taxed
as regular income
and are subject to a 15 per cent non-resident
withholding tax (for which a credit is avail-
able on your Canadian tax return).
Many flavours of U.S. index ETFs trade
on the TSX—for example, hedged, unhedged
and U.S. dollar denominated.
Dan Hallett, Highview Financial Group
as regular income