Strategy to Minimize Windfall Elimination Tax Effect

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Andreww
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Joined: Tue Mar 27, 2018 3:21 pm

Strategy to Minimize Windfall Elimination Tax Effect

Post by Andreww »

I retired to Nevada in 2018 at age 60 after working 12 years in Canada and 23 in the US.

I want to maximize CPP/SS pensions and minimize the effect of the Windfall Elimination Provision.

My plan is to take CPP at 60 and SS at 70 so I would get 10 years of CPP with no overlap with SS (no WEP?), and start SS at 70.

I guess that the CPP will be only $CAD100-200 monthly, and that SS will be over $US3000, so the WEP tax impact cannot be large.

Thoughts? Make sense?
stewak2
Posts: 109
Joined: Mon Sep 18, 2006 2:47 pm

Post by stewak2 »

My plan is similar, take CPP at 60 and full US SS at 67 1/2, similar logic. I'm a commuter to work in US, resident of Canada - not working in Canada. So I plan to take CPP even while working in US, apparently this is legal, maybe retire at 62 or 63. CPP will be taxed heavily while still working, of course, but I think it's still the better choice. Delaying CPP to collect more just means losing more SS to windfall elimination
nelsona
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Location: Nowhere, man

Post by nelsona »

I agree with taking CPP early, especially if no longer paying into it.

As to SS, I don’t see the point of delaying past your SS ful retirent age (~66) especially if you have a spouse that can collect a spousal amount when you start. That would more than make up the loss from taking it before 70 and any WEP.
You need to start paying for Medicare at 65 anyways.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
stewak2
Posts: 109
Joined: Mon Sep 18, 2006 2:47 pm

Post by stewak2 »

66 + 10 months for me, not 67 and 6 months, you are right
MaggieA
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Joined: Sun Oct 31, 2004 4:06 pm

Post by MaggieA »

Another thing to consider about deferring taking CPP or SS, is that although you'll get a larger payment, you're pushing it more into your lower-spending years. Seniors don't maintain the same lifestyles from their 60s into their 90s. People in their 60s and 70s are commonly keen to travel, etc. People in their 80s typically stick closer to home, and I've heard it said "the big decision of the day is what to have for lunch". This is a generalization, of course, but it's certainly true of my 80-something parents. So long as you think you'd be OK for long-term care type expenditures, you might want to take the CPP or SS promptly so you can go for the gusto while still young and healthy enough to enjoy it.
Powla
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Joined: Fri Apr 13, 2018 2:53 pm
Location: Pennsylvania

Post by Powla »

Have you run the numbers through the online WEP calculator at the SSA site https://www.ssa.gov/planners/retire/anyPiaWepjs04.html

I created comparisons for taking the SSA at 62, FRA and 70 and for me, taking CPP at 60 does not make much of a difference over the course of 30+ years. I have 19 years of earnings in the US and 21 years in Canada, albeit my Canadian earnings were not very high when I was younger.

I called Service Canada today to get my current benefit and I noticed that the benefit continues to drop for every year that I have no Canadian earnings. So, contrary to the normal folk, it would be to my advantage to take it early.

I was also pleased to hear that I qualify for OAS and that there is no income cap repayment for US residents. I hope that is correct, because that would make up the difference for the WEP.
Powla
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

I agree with everything you said. The best way to look at WEP is as a reduction in CPP. So the longer you have CPP before you take SS, the longer you have the full COP you are entitled to.

QPP has a similar calculation to CPP, and indeed, the more months you wait with no income, the smaller your average earnings become, so it probably washes out against the increase you get by waiting.

And I can confirm that OAS does not impact WEP. Of course, you will not get full OAS, since you did not spend the required 40 years as an adult, but you will get about half the maximum, for life, regardless of where you live.

And remember if you live in US while collecting these cdn benefits, they are not taxed in Canada, and OAS is not subject to any clawback.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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