Retirement Planning 2019

My friends and I were talking about how fortunate we were to have a defined benefit pension. My friends were talking about how much money a person who did not have a pension would have to save. As we discussed the topic, I realized that the calculations they were using were not accurate. The assumption they made was that the person had no government help. This is not true in Canada. 

Every Canadian, who is eligible receives Old Age Security (OAS), but they have to apply for it. Every Canadian who has worked in Canada will receive a Canada Pension Plan (CPP) income. The amount will depend on how long a person has worked and how much they and their employer have contributed to the plan. The more you make, the more you contribute and the more you receive. Today a person who retires with just the  OAS and the CPP will average about $1,300 a month or $15,600 a year. If they have no other income then they may be eligible for the Guaranteed Income Supplement which may raise their income a bit.  

In Canada as of September 2017, the average wage for Canadian employees was $986 a week – or just over  #222222;">$51,000 a year. There is one line of thinking about retirement that claims we need between 60 and 70% of our income to be comfortable in retirement. 

70% of $51,000 is $35,700 and 60% of $51,000 is $30,600. Our average Canadian knows they will receive about $15,600 a year in government pensions, so all they have to do is save enough money to generate an extra $15,000 to $20,100 a year to be comfortable in retirement. They do not have to generate the full $35,700. 

Of course, the younger one starts to save to save for retirement, the less per month has to be put away. In Canada, we have the Registered Retirement Savings Program as one way to save money or retirement. With this program, an individual will save money on taxes when the money is put into the account, and pay taxes when the money is taken out. Another program we have is the Tax-Free Savings Account, which does not have to be a savings account, it could be an investment account. In this program money put into the account is not taxed as it grows, and there is no tax to be paid when money is taken out of the account. Individuals who are saving for retirement need to decide which of these two programs work best for their circumstances. Many people have both. A tax and investment advisor can help you. 

Most banks or credit unions have these advisors, or you can find them by searching online. Make sure that the advisor you work with, reflects your values and is accredited and is not selling a product. 

Retirement planning can be complicated and should be done by talking to a qualified expert.