06/30/2023
Retirement Income System in Canada:
Your income at retirement typically comes from three main sources which are referred to as the “three pillars” of Canada’s retirement income system:
Ø The Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)
Ø The Old Age Security (OAS)
Ø Employer-sponsored pension plans and personal savings and investments.
It’s very important to have an idea of how much money you can get from these sources to be able to plan adequately for your retirement.
When is the appropriate time to start thinking about retirement? As soon as you start earning or better still immediately you are born, which can be initiated by the parents.
Why do I recommend this, some young folks will prefer not to think about saving and investing in their early earning days as they feel they have more time ahead of them, so some prefer to enjoy their resources now and commence planning about investing in five to ten years or later. What is the implication of delaying means to your investment? It hampers growth and reduces how much you can access at retirement.
I will be writing on each of these pillars weekly, starting with Canada Pension Plan (CPP) or Quebec Pension Plan (QPP):
The Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) provide monthly payments to people who contributed to the plans during their working years.
CPP contributions are managed by the Canada Pension Plan Investment Board (CPPIB). The CPPIB invests these contributions to ensure there is enough money in the plan to provide payments for current and future Canadian retirees.
The amount of money you receive from CPP or QPP depends on the following factors:
Ø How much and for how long you have contributed to the CPP.
Ø The age you decide to start your pension.
Ø Your average earnings throughout your working life.
You can choose to take your CPP or QPP as early as age 60 or as late as age 70. The earlier access lowers your monthly payments while deferring it increases your monthly payments.
From Canada.ca, the average monthly amount paid for a new retirement pension (at age 65) in January 2023 was $811.21, does this bother you and is this enough to live on in Canada?
Planning is key, when we fail to plan, it means we have a plan to fail. It’s not too late to take a step in the right direction.
Please feel free to connect for a free consultation and financial planning.