how retirement GIS works

(Image: poverty, working age and retired compared.)

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/the-economists/lets-inject-some-creativity-into-retirement-policies/article2347543/

The GIS rules are complex, and you would have to sift through the legislation and regulations to figure out how it actually works. Currently, a single individual can receive a maximum benefit of $732 per month when over age 65. Regular benefits are reduced by 50 cents for every dollar of income from some sources – including RRSPs, pensions, employment earnings over $3,500, and CPP. Benefits are not reduced for income from other sources – OAS, TFSAs or your first $3,500 in wages. Realized gains on investments count against GIS, while unrealized gains (such as those on housing assets) do not.
Individuals age 60-64 are eligible for benefits if their spouse is over 65 or they are widowed. Single individuals age 60-64 are not eligible, nor are widows who get married to someone under 65...

On the plus side, the GIS and other public pension expansions have been credited with the dramatic reductions in elderly poverty since the 1970s. While more than 30 per cent of seniors had income less than Statistics Canada’s Low Income Cut-off in 1977, only 5 per cent were this poor in 2008 (see here for some details).

Can we find a way to improve on senior poverty, reduce the complexity of this system, minimize the distortion to savings and work decisions, and still save some tax dollars? Here’s some ideas that we could debate (and should probably be considered as a package)...

Currently, a single senior over 65 with no other retirement income could receive up to $15,269 annually from OAS and GIS combined. Opinions will differ, but most Canadians would not consider that outrageous.

Create a progressive GIS clawback system, potentially improving the work and lifetime savings options for the poorest seniors who are able. For example, we could apply a 0 per cent clawback on the first $2,000 of income, 25 per cent on the next $2,000, 50 per cent on the next $2,000, and 75 per cent on any income above $6,000. I’m sure a better scheme could be derived, but this one would result in senior individuals having roughly $25,000 (including OAS) before being completely cut off from GIS.

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http://www.tammyschirle.org/research/senior_poverty.html

D - good stuff, Professor Schirle!!!