Retirement Planning Vancouver | Canada’s Retirement Benefits
What can you look forward to at retirement? Do you have a solid plan in place so you can retire the way you desire? There are many things you need to ask yourself in order to know how much you will need at retirement to live that stage of your life the way you want. You will have worked for most of your life, you do not want to leave retirement income to chance.
You certainly do not want to have to keep working to merely survive. Worst case scenario is you are not physically or mentally able to keep working due to health issues or technological advances you just may not be able to catch on to in the workforce.
Retire the way you want
To retire the way you want you will need to know what tools or resources you will need in place to reach your goal. If you are unsure of any of this and realize you would like some help in planning then you have landed in the right place. Thomas C Chan is a trusted financial advisor who can help you build wealth, plan for your retirement, and is an expert on what insurance products can help you along the way. The goal is to live the retirement lifestyle you desire but also have your money outlive you.
There are many ways to build wealth. Along with this there are a multitude of tools you can use to retire wealthy, and it is important to understand which ones will give you the best outcome. Notably relying on the Canadian government’s retirement benefits alone will not help you retire wealthy. You will not even have enough to support your everyday needs. Even though these benefits are available today they may not be in the years to come.
Up to 3 Retirement Benefits
However, if you are close to retiring you make qualify to receive up to the three that are available. We will go through each one by breaking them down in detail. You will learn how you can use the ones our Canadian system offers to help supplement your income in your retirement. However, to retire wealthy these benefits are not enough, and you will need to plan for more lucrative methods of building retirement wealth.
The first benefit available is the Canada Pension Plan also known as CPP. Originally this plan was set up in the 1960s with the goal to help Canadians by providing 25% of their retirement income. As time has gone by our living standards have increased and so the Canadian government has upped that provision to 33% of Canadians retirement income to better match to our evolved lifestyle standards.
Every Canadian eighteen years or older and employed must contribute to the CPP. As of 2021 the maximum benefit that you can receive at age 65 is $1203.75. Unfortunately, not a lot of people will get that maximum amount. The average is $690 per month. To qualify for receiving CPP you must be at least 60 years old and have made at least one contribution in your lifetime. Of course, your lifelong income is what determines how much you qualify for.
Many people do not like that CPP is automatically deducted from every paycheque. They feel they could save that money themselves and get a much higher return on investment with it. But since we do not have many options to do that, something to strive for is to maximize your CPP even if you do not like that it is automatically deducted.
There are three parties involved in the CPP. The employee contributes up to 5.25% of their salary after $3500. The employer is obligated to match that with another 5.25%. The third party is the CPP investment board. The two parts’ contribution is then invested accordingly by the board to sustain the plan for seventy-five years to come. Some factors that affect the amount you can collect are how long you have contributed to the fund, and what age you decide to start receiving the benefit.
If you pay into it from the age of 18 to 65 the Canadian government will exclude the lowest eight years of contribution knowing wages are lower at certain points of every person’s career. For mothers, the 7 years post birth are excluded. If you take your CPP at 60 you will receive 36% less per month, than if you waited until 65. If you decide to wait until 70 you will receive 42% more than at age 65. Some things to consider are how healthy you are and what other sources of income you have in place to retire on.
The second benefit available is Old Age Security or OAS. Unlike CPP this one does not require contributions. This benefit is funded solely by the Canadian government. You will not receive these before age 65. As of 2021, the maximum you can collect is $618.45. Your marriage status does not affect it and the amount goes up every year to factor in for inflation.
So how many years do you have to work in Canada to get a pension? To qualify for OAS, you must be a Canadian citizen or a permanent resident who has lived in Canada for more than ten years between the ages of eighteen and sixty-five. To qualify for the full amount, you must have lived in Canada for more than forty years.
You may experience a decrease in your OAS or even a complete claw back to zero. If your income is too high this can affect it by a decrease in 15% all the way to a zero claw back. Keep in mind your CPP, work pension plan, RRSP, and investments all count towards your income. There are strategies to bring down your RRSP and pension plan, so they do not affect your OAS benefits. You should plan this out in advance with a financial advisor.
The third and last benefit that some Canadians can receive is the Guaranteed Income Supplement or GIS. This is a support for low income, and you must qualify for OAS as well. Your income must be below $18 600 assuming you are single. The closer your income is to zero the higher the benefit to a maximum of $916.38 per month. The GIS is tax-free.