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BMO Bank of Montreal

November 22, 2011 09:39 ET

Financial Literacy Month-BMO's Tip of the Day: Be Tax-Smart to Maximize Your Old Age Security Benefits

TORONTO, ONTARIO--(Marketwire - Nov. 22, 2011) - To mark Financial Literacy Month, which was launched by Finance Minister Jim Flaherty, BMO is releasing a series of financial tips throughout November. As part of Making Money Make Sense and BMO SmartSteps, BMO's tips are designed to help individuals and families save and manage their day to day finances more effectively.

BMO's Tip of the Day: Maximize your Old Age Security (OAS) benefits by adopting the right tax strategies.

  • OAS is a government benefit paid to Canadians 65 and over; individuals can receive up to $6,300 per year. If your income is above a certain threshold you will have to give back some or all of your OAS benefits. Using the right tax strategy can help avoid this.
  • When close to the retirement income threshold level, be careful when you sell assets such as securities, stocks, bonds, etc. Income made from such a sale is considered a taxable capital gain and will be included in your total income; this may put you over the threshold. A tax-smart alternative is to split any taxable capital gains over two tax years, i.e. selling half in December and the other half in the new year. This could save you repaying a considerable amount of your OAS benefits.

"It is critical that retirees be tax-smart and adopt a long-term approach that will allow them to pull their income from the most advantageous sources," said Tina Di Vito, Head of the BMO Retirement Institute and author of the recently released bestseller 52 Ways to Wreck Your Retirement… and How to Rescue It. "Doing so will ensure that those with a higher retirement income don't exceed the thresholds that allow them to continue to receive government benefits and credits, which could have a significant impact on their total annual income."

BMO Financial Literacy Month Tips

November 1: Pay more than the minimum payment on a credit card balance.

November 2: Choose a shorter amortization for your mortgage.

November 3: Contribute to a child's Registered Education Savings Plan (RESP) as early as possible.

November 4: Invest in a Tax-Free Savings Account (TFSA) to maximize your savings.

November 7: Switch to weekly mortgage payments to save interest and become debt-free faster.

November 8: Take advantage of credit card travel insurance to lower costs.

November 9: Start early and contribute often to your investment account, rather than waiting to invest.

November 10: Use a line of credit to consolidate high-interest debt and save on interest costs.

November 14: Canadians can give the gift of securities and benefit at tax time.

November 15: Students, pay off your credit card balances and take advantage of student discounts to save money.

November 16: Pay an extra five per cent on your mortgage every year to reduce interest costs.

November 17: Secure your retirement by starting to save early and taking advantage of compounding growth.

November 18: Students can save money by ensuring they are in a no-fee student banking plan.

November 21: The Registered Disability Savings Plan (RDSP) is a powerful investment option that can offer long-term financial security for persons living with a disability.

For more on financial literacy, BMO encourages Canadians to visit http://www.financialliteracymonth.ca/ and http://www.bmo.com/home/about/banking/corporate-responsibility/customers/financial-literacy.

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