Retired Money

By Jonathan Chevreau on December 19, 2023
Estimated reading time: 8 minutes

By Jonathan Chevreau on December 19, 2023
Estimated reading time: 8 minutes

Inflation and taxes—both can affect retirement income. Thankfully CPP, OAS and GIS have inflation indexing. Here’s how it may affect Canadian retirees.

While inflation and taxes are both major scourges for retirees, there’s a silver lining in how the two interact. That’s because the federal government builds in a degree of inflation-indexing to tax brackets, retirement vehicle contribution room and major retirement programs like the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).

As CIBC Private Wealth’s Jamie Golombek recently wrote for the Financial Post, come 2024, all five federal income tax brackets are indexed to inflation using the rate of 4.7%. The new brackets are 15% for income between $0 to $55,867; 20.5% between $55,867 and $111,733; 26% between $111,733 and $173,205; 29% between $173,205 and $246,752, and 33% beyond that. Most provincial income tax brackets are also indexed to inflation.

The basic personal amount (BPA) for 2024 is $15,705. That means most people will pay no tax on the first $15,705 of income.

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Early in the new year, stringent savers will be pleasantly surprised to find inflation has bumped 2024 contribution room for tax-free savings accounts (TFSAs) to $7,000, up from $6,500 in 2023. It was $6,000 for the three consecutive years before that. That’s all nicely up from the original $5,000 available when the program launched around 2009.

Recall that in 2015 the TFSA contribution amount was lifted to $10,000 before being cut back by the Trudeau administration.

As of January 2024, a Canadian who has never contributed to a TFSA before would have a cumulative contribution room of $95,000. That’s a significant amount, which can really add up over........

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