Welcome to 2021! We all know how challenging it can be to stay on top of ever-changing facts and figures in the field of personal finance. To help kick-off the New Year, we have compiled a short list of key 2021 facts and figures to keep in mind for the new year. 

TFSA Limit

The 2021 TFSA limit remains at $6,000, unchanged from the 2020 limit. A few key points regarding your Tax Free Savings Account:

• TFSA contributions are not tax-deductible.
• Your TFSA contribution limit is cumulative, and any amounts not used in the current year are carried forward to the next year.
• Since its inception in 2009, the annual TFSA limit has fluctuated between $5,000 and $10,000. As of 2021, the TFSA cumulative total contribution limit is $75,500.
• To find out your personal TFSA contribution limit, consult the Government of Canada’s TFSA Guide For Individuals website.
• A significant difference between TFSAs and RRSPs is that amounts withdrawn from your TFSA can be re-contributed in subsequent years. 

RRSP Limit

For 2021, the maximum RRSP contribution limit is $27,830. This represents a $600 increase from the 2020 limit of $27,230. A few key points regarding your Registered Retirement Savings Plan:

• Unlike the TFSA, the RRSP contribution limit is not the same for all – you only “earn” that much contribution room if your income supports it.
• The RRSP contribution limit is 18% of your earned income as defined by Income Tax Act.
• As such, your previous years’ income would have to be at least $154,611 in order to generate the maximum contribution limit of $27,830 in 2021.
• To find out your personal RRSP contribution limit, consult the Government of Canada’s RRSP information website.
• Your RRSP contribution limit is cumulative just like your TFSA contribution limit, and any unused contribution amounts are carried forward. 

CPP Contribution Rate and YMPE

The CPP contribution rates, for both employer and employee, are set at 5.45% in 2021, up from from 5.25% in 2020. Additional CPP and YMPE information to keep in mind:

• Those who are self-employed must pay both the employer and employee contributions to CPP, for a total of 10.9%.
• CPP contributions are only levied on income between the YBE (Year’s Basic Exemption) and the YMPE (Yearly Maximum Pensionable Earnings). While the YBE remains unchanged at $3,500, the YMPE has increased from $58,700 in 2020 to $61,600 in 2021.
• Unless you’re self-employed, the maximum you can contribute to CPP in 2021 is $3,166.45.
• For those who are self-employed, and therefore contributing the employee and employer portion, that maximum amount is doubled to $6,332.90. 

EI Contribution Rate and MIE

The Maximum Insurable Earnings (MIE) have increased in 2021, although the employer and employee contribution rates remain unchanged:

• For 2021, the Maximum Insurable Earnings (MIE) has increased to $56,300, which is an increase of $2,100 from the previous MIE of $54,200 in 2020.
• The employee contribution rate remains unchanged from 2020 to 2021, holding constant at 1.58%.
• The employer contribution rate also remains unchanged from 2020 to 2021, holding constant at 2.212%.
• Unlike CPP contributions, there is no basic exemption amount from EI contributions – every dollar of income up to the MIE is subject to EI contribution.
• The maximum employee contribution of $889.54 and employer contribution of $1,245.36 are levied for anyone earning an income of $56,300 or more in 2021. 

CPP Benefits

For those nearing or entering retirement this year, remember that Canada Pension Plan (CPP) retirement benefits are not automatic – you must apply before you can start receiving your CPP pension. Additional points to keep in mind include:

• The “normal” start date is age 65, but you can begin receiving income from CPP or the corresponding Quebec Pension Plan (QPP) as early as age 60, or as late as age 70.
• The amount received varies greatly from one person to the next, and your CPP benefit is determined entirely as a function of how much you’ve contributed during your working years.
• You can consult the Government of Canada to get your personal Statement of Contributions to the CPP.
• According to the Government of Canada’s most recent figures, as of October 2020, the average monthly CPP/QPP benefit at age 65 was $689.17 per month.
• CPP retirement benefits are taxable.

OAS Benefits and Clawback

Recall that, unlike CPP, the Old Age Security benefit has nothing to do with working, and is based solely on the number of years you have lived in Canada. That is, while CPP is a contributory program, OAS is a non-contributory program. Additionally:

• OAS typically starts at age 65, but can be postponed to any time up until age 70.
• According to the Government of Canada’s most recent figures, as of January 2021, the maximum monthly OAS benefit at age 65 is $615.37 per month.
• Unlike CPP, your OAS benefits will be “clawed back” if your income reaches a certain point. That threshold was $79,054 in 2020, and has been increased to $79,845 for 2021.
• The OAS clawback is a gradual reduction in benefits, and eligible seniors can still receive a partial pension with incomes up to $129,075 in 2021.
• Like CPP, OAS retirement benefits are also taxable.

Bottom Line

How do the facts and figures presented here fit into your financial plan? How much should you contribute to your RRSP or TFSA, or when should you start receiving CPP or OAS? If you want to speak with a professional advisor, or if you have any other questions about any of our services at ModernAdvisor, just contact us.