Money smarts really begin and end with vocabulary (says the writer). No it's true. I was on The Lang & O'Leary Exchange last week as the "viewer-who-needs-retirement-advice" and it was quite an experience in financial literacy, I mean illiteracy. What on earth is an OAS and a GIS? I wondered as I strained into my earpiece to hear number-one ranked personal finance blogger Preet Banerjee.
However, Preet and I hope to fix that this week when I interview him for this blog. I want to know where his passion for personal finance came from and how young he was when he started picking up the vocab.
But back to the retirement vocab that I now know I need to know. I mean, how can I talk to a financial advisor (as Preet suggested on the show) about retirement planning when I don't really know the money words that make up the language of retirement?
OAS, GIS & MORE
OAS stands for Old Age Security pension, a monthly income that comes to you from the federal government. You must apply to receive it. You may qualify if you are over 65 and have lived in Canada for at least 10 years since your 18th birthday. This is taxable income and can be reduced if you are bringing in too much income from other sources such as investments, RRSP, workplace pension, etc. The government recommends that you apply for OAS 6 months before you turn 65. Maximum monthly benefit $524.23.
GIS stands for Guaranteed Income Supplement. You have to already be receiving OAS and the amount you qualify for depends on your income and marital status. It's designed to help low-income seniors. Maximum monthly benefit for a single person is $661.69.
CPP stands for the Canada Pension Plan. If you have paid CPP as an employee, you can apply to start recieving monthly payments between the ages of 60 and 70. If you are self-employed I'm not sure exactly what you do...I'll have to check with Preet or my financial advisor (when I get one).
RRSP stands for Registered Retirement Savings Plan. The idea behind this is that you are earning a higher income now than you will when you are retired. So this program has been set up to encourage you to sock away income, tax-free, in an RRSP when you are younger and richer so that it will grow (hopefully at a rate higher than inflation) and you can take it out and pay less income tax on it when you are older and earning less.
For even more retirement planning fun and to test your retirement vocabulary try the Canadian Retirement Income Calculator on the Service Canada website. It will get you thinking about what you know (and don't know) about how government money is going to come to you (or not) in your old and crusty years. And, if you buy into my idea that money smarts begin with financial literacy, you'll find the calculator a fun way to brush up on the language of retirement.
And please, if you comment on this post, please refrain from cautioning me about the dangers of street-crossing and, please, say nothing about pizza, of any kind!
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