Your sources of retirement income

by Natalie MacLellan on October 29, 2009

in financial goals

Last week we talked about how much money you will need in retirement. Today, consider what sources of funds you may already have. There are three basic sources of retirement funds to think of:

1.   Money from the government
Most of us will be able to get money through one or more government plans, but you have to apply and be approved. There are three major plans:

Canada or Quebec Pension Plan (CPP/QPP):

Provides a monthly payment starting as early as your 60th birthday. What you get depends on what you paid in to the plan while you were working, and your age when you start getting your monthly payment.
Old Age Security (OAS):
Provides income to Canadians age 65 and up.  What you get depends on your other income, and how long you’ve lived in Canada.
Guaranteed Income Supplement (GIS):
Helps Canadians with lower incomes.
You must be 65 or older, and you must apply each year. What you get depends on how much other income you have, as well as your spouse’s income, if applicable.

The most a person would receive today from the government is about $15,000 a year. That amount may go up if you qualify for low-income programs. Amounts may also be higher for couples.

2.   Money from a pension plan or retirement savings at work

About half of all working Canadians get help with saving for retirement from their workplace. This may be through a pension plan or a group RRSP. Whenever possible, take full advantage of employer matching programs. If you have a pension plan, make sure you find out what it offers and how it will work with your other income sources.

3.   Any current savings or investments
Your own savings can play a key role in getting ready to retire. You may have already been setting aside money for retirement, or you acquired funds through sale of an asset or an inheritance.

Subtract your expected earnings from government or other pensions from your total retirement needs. If you’re lucky, you have a workplace pension that meets your needs, however most Canadians do not, and will have to set up their own savings plan.

Our next post will look at translating your yearly required retirement income into a retirement savings plan.

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