Planning Your Golden Years:
A Retirement Guide
Establish Your Financial GoalsConsumers have often heard that they’ll need about 70% of their pre-retirement income to live comfortably in retirement. But that may be wildly inaccurate.
The fact that people live longer, the desire to travel, or even children or grandchildren who move in, can make retirement more expensive than expected. If you’re more than fifteen years from retirement, a good place to start reviewing what you might need is the easy-to-use Retirement Savings Calculator provided by Service Canada.
Most people will receive income from two or three sources during retirement, including:
- Old age security
- Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)
- Employer pension
- Registered Retirement Savings Plan (RRSP)
- Other sources of ongoing income (part-time work)
Before you retire, it’s important to understand what to expect from each.
The Old Age Security (OAS) Pension is a monthly benefit available to most Canadians 65 years of age or older who have lived in Canada for at least 10 years.
You should apply for the Old Age Security Pension six months before you turn 65. You can download an application kit or contact Service Canada to request that a kit be mailed to you.
The kit contains detailed instructions to help you apply for the Old Age Security Pension, including where to send the completed application form.
The Canada Pension Plan is a contributory, earnings-related social insurance program that provides you with a stable and dependable pension you can build on for retirement. It also provides you and your dependants with basic financial protection if you become disabled or die. For more information regarding your CPP, visit the Service Canada website at www.servicecanada.gc.ca.
Employer pension – Talk with your employer or human resources department to understand the full details of benefits that they provide to you. You should be able to obtain information in writing that explains contributions and stipulations.
Consider joining an investment club to get both the know-how and motivation to start investing. Visit www.iac.ca/default.asp for information on starting an investment club. It can be fun, and profitable!
Talk with a financial planner before you start withdrawing money from your retirement plans. The rules about withdrawals are complicated, and if you don’t do it right you can end up paying expensive taxes and penalties. Here are several resources for finding a financial planner:
The Financial Planners Standards Council has developed a code of ethics and certification for Canadian financial planners. They have a comprehensive website that provides you with information and recommendations for making choices about your financial planning. At www.fpsccanada.org, you will find a learning centre that includes information regarding estate planning, tax planning, asset management, retirement planning, along with multiple personal financial planning topics.
The Canadian Bankers Association provides a list of chartered banks along with a plethora of educational material on the economics of the Canadian market.
Registered Retirement Savings Plans (RRSP) – allows savings for retirement to grow tax free in a special savings plan registered by the Canada Revenue Agency. An RRSP account is set up through a financial institution, caisse populaire, or credit union. Contributions can be made to an RRSP up until December 31st of the year the contributor turns 69 years of age. Those contributions are tax deductible. Check out your local bank’s website for more information or visit the CBA’s website at www.cba.ca/en/.
Part-time Work: This may depend on what you plan to do in retirement, and how many hours you’ll be able to work. If you enjoy your current job but want to cut back, find out whether your company hires contractors or part-time workers.
If you want to pursue a different part-time job or business during retirement, can you start apprenticing now part-time to find out what the work is really like, or to start building experience or credentials? The more homework you do before you retire, the more likely you are to make a smooth transition afterward.
