I’m 63 years old. Like many of you, I have been asked by my LTD provider (Manlife) to apply for CPP-D, retroactive to the date I was approved for LTD. I didn’t think much of it, as I figured that I would be no worse off afterwards, since my LTD payment would just get reduced by whatever I receive in CPP-D.
In speaking with the Manulife agent though, I came to realize that CPP-D is taxable, while my LTD payments are not. Does this mean that I am actually not cashflow neutral afterall? On its own, I think the CPP-D payments are below my personal credits threshold, but I plan on drawing down on my RRSP’s over the next couple of years. Wouldn’t this put me in a position where I am receiving less proceeds than before?
Yes it would, which is annoying, because it means the people who are more severely disabled end up netting less. However your LTD policy probably requires you to apply, and if you don’t, then they will deduct what they think you should have gotten anyway. So it’s not really optional in the end.
On the positive side, if you have not maxed out your future CPP, you will get slightly higher CPP since years that you are off on CPPD don’t count as zero years in the CPP calculation.
Also, have you applied for the DTC? That can help offset the additional income.
You’ll get the same but CPP-D is taxable at tax time.
It won’t matter if your income is below your personal exemptions.
Do you have the DTC (Disability Tax Credit) to increase your exemption?
Apply for DTC to offset your taxes. Also, I would wait to draw your rrsps if you can until cpp disability ends at 65. Once it changes to cpp I would assume your amount will be lower as you lose the disability portion. Also…CPPD will almost always deny the 2st application. Your lump sum paint gets divided accordingly when you file taxes. It knows that it was for separate years.