Certified Financial Planner (CFP) Practice Exam · Question
Why is the Guaranteed Income Supplement (GIS) clawback often a concern for financial planners advising their clients?
The GIS clawback (reduction) is applied at a rate of $1 for every $2 of net annual income (excluding OAS and GIS) above certain thresholds. This can quickly ero
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Question: Why is the Guaranteed Income Supplement (GIS) clawback often a concern for financial planners advising their clients?
Answer options:
- It applies to all types of income equally, leading to significant taxation. ✅ It can significantly reduce expected retirement income for low-income seniors who save modestly in registered plans.
- It is always applied at a progressive rate, making it unpredictable.
- It reduces OAS benefits directly, affecting all seniors with other income.
Correct answer: It can significantly reduce expected retirement income for low-income seniors who save modestly in registered plans.
Explanation: The GIS clawback (reduction) is applied at a rate of $1 for every $2 of net annual income (excluding OAS and GIS) above certain thresholds. This can quickly erode or eliminate GIS benefits for low-income seniors who have modest private pensions or RRIF withdrawals, causing a significant reduction in their overall retirement income.
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