“Faisal, I heard if Alberta separates, they could take away my CPP or OAS?”

We’ve heard questions like this from clients and prospective clients.

It’s because the headlines are causing people to react when they don’t need to.

I understand why the confusion exists, our country is going through some big changes, but now's the time to clarify the headlines with the facts, based on what I see.

Don’t Let the Headline Become the Plan

I’m starting to sound like a broken record, but headlines are designed to get your attention.

Add the uncertainty of the times into the mix and any headline suddenly feels urgent.

But when your retirement can last 30 years or more, a headline or even a referendum shouldn’t rewrite a plan built to last decades.

Because your plan should be your rock and what really matters is understanding what might change, what cannot, and where your retirement could be vulnerable if circumstances eventually do change.

What Happens After the Referendum?

On October 19, Albertans will be asked whether Alberta should remain a province of Canada or whether the provincial government should begin the constitutional process required to hold a later, binding referendum on separation.

That distinction matters because no matter how Albertans vote, your CPP, OAS and the tax system won’t suddenly change on October 20th.

Any fundamental change to Alberta’s relationship with Canada would involve significant legal, constitutional and political negotiations. Those details do not exist today.

That means retirees should be careful about making permanent financial decisions based on assumptions about what “could” or “might” eventually happen.

What About Your CPP?

CPP is one of the biggest concerns we hear about.

For most Canadians, it represents decades of contributions made throughout their working lives.

But an independent Alberta would create questions about how the pension system would operate going forward.

Alberta has already explored the possibility of creating its own provincial pension plan, and estimates have varied considerably over what portion of CPP assets Alberta could potentially claim.

Those questions have not been resolved and will not be resolved on October 19th.

So be cautious when someone tells you with certainty that your CPP would disappear, stay exactly the same or automatically be replaced.

We simply aren’t there yet.

OAS Is Different

Old Age Security works differently from CPP as you don’t contribute directly through your paycheque.

It’s funded through federal government revenues, with eligibility largely determined by your age and how long you have lived in Canada.

That creates a different set of questions if Alberta’s constitutional status were ever to change.

- Would existing benefits continue?

- Would Alberta create its own program?

- Would there be transitional arrangements?

Those are questions that would have to be negotiated.

And negotiations that haven’t happened yet can’t produce reliable retirement-planning assumptions today.

What About Taxes?

The referendum will not change your tax bill. Why?

Today, Canadians still operate under the same federal and provincial tax rules, and your RRSP, RRIF, TFSA and non-registered investments continue to be governed under the same existing system.

A future constitutional change could eventually raise questions about income taxes, estates and assets held across borders.

But again, those are future questions.

Your tax strategy should be based on the rules that exist today while leaving enough flexibility to adapt if those rules change.

What If Markets React?

Since there is uncertainty in the polls, retirees can be the most vulnerable since they might withdraw money from the portfolios, even when there’s a downturn.

That is why the structure of your plan matters and it should be diversified across different sectors and types of assets.

This is also where our Four Buckets come into the conversation.

The Income Bucket should support your lifestyle today.

The Growth Bucket should support your future.

Your Health Bucket prepares for any future health costs.

And your Legacy Bucket is about what you want to leave behind.

And no matter what happens in the upcoming election, each bucket is there to give you a solid foundation.

That way you can live worry-free.

You Don’t Have to Predict the Future

Nobody knows what Alberta’s relationship with Canada will look like in the future.

But the function of your plan is that when something changes in your life, you have room to breathe.

If you’re within 10 years of retirement or already retired, this may be a good time to stress-test your income, taxes and investments against different retirement scenarios.

Meet with us one-on-one if you have questions about how this could affect your retirement.

Contact us at info.pkag@cibc.com.

We also have a free, no-obligation seminar coming up on November 17th where we'll discuss how to protect your income, your health, and your legacy in retirement.

We hope to see you soon.

This article is for general information only and is not personal financial, tax or legal advice. Please consult your advisor about your own situation.

This commentary is intended to provide general information and should not be construed as tax, legal, financial, or other advice. Individual circumstances and current events are critical to sound planning; anyone wishing to act on the information presented should consult with his or her tax, legal or financial advisor.

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. David Popowich, Faisal Karmali, Leanna Wachniak, Robert Gerrie are Investment Advisors with CIBC Wood Gundy in Calgary. The views of David Popowich, Faisal Karmali, Leanna Wachniak, Robert Gerrie do not necessarily reflect those of CIBC World Markets Inc. CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc.