Building a Better Retirement Paycheque
Constructing your retirement income can often feel like a daunting endeavour. But not to worry: you may have more to work with than you realize. By familiarizing yourself with the range of building blocks at your disposal, you can assemble a plan to make the most of every income stream and have you feeling more confident about the years ahead.
Government Retirement Benefits
Canada / Quebec Pension Plan (CPP/QPP)
• Paid monthly.
• Eligibility: contribution during working years to Canada Pension Plan or Quebec Pension Plan.
• Amount based on: length and amount of contribution and starting age of receipt.
•Average amount for new beneficiaries (October 2016): $644.35.1
Old Age Security (OAS)
• Paid monthly.
• Eligibility: residence in Canada for at least 10 years. No working or contribution requirement.
• Amount based on: length of residence after age 18. High-income pensioners may be subject to a “clawback” repayment provision.
•Maximum monthly payment amount (January to March 2017): $578.532
Guaranteed Income Supplement
• Paid monthly.
• Eligibility: low-income Canadians receiving OAS.
• Amount based on: marital status and income.
Employer Pension Plans
Defined Benefit Plans
•Contributions: you [check-mark], employer [check-mark].
•Payments: predefined based on a percent of your income and years of service.
Defined Contribution Plans
• Contributions: you [check-mark], employer [check-mark].
• Payments: income from investment earnings. Income options can include Life Income Fund (LIF), Locked-In or Prescribed Income Fund (LRIF, PRIF) or a life annuity.
Deferred Profit Sharing Plans (DPSPs)
• Contributions: employer on your behalf [check-mark].
• Payments: income from investment earnings. Funds are tax-sheltered until retirement, when you can either transfer to your Registered Retirement Savings Plan (RRSP) or an eligible retirement option.
Income from Converted RRSPs
Prior to the end of the year you turn 71, you must shift your RRSP to a retirement income option, such as:
Registered Retirement Income Fund (RRIF)
• A savings plan within your control.
• Tax-sheltered until withdrawn.
• Mandatory minimum annual withdrawals.
•A financial contract with an insurance company.
•Guaranteed set payments comprised of a return of original lump-sum capital (non-taxable) and interest income (taxable).
Personal Savings and Investments
•Other Personal Savings & Investment
Be sure to consider how part-time employment might affect your tax bracket, OAS or GIS.
Income from a Reverse Mortgage
Look at converting part of your home equity into non-taxable funds that can be invested elsewhere in your retirement plan.
Regardless of how you assemble your retirement paycheque, if you start with a full understanding of the options available you’ll be equipped to build it on a solid foundation.
Talk to a Financial Planner today.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.