Planning for retirement means understanding your sources of income and organizing them strategically for maximum stability. Your retirement income will typically come from a combination of government benefits, pension funds, personal savings accounts, and other investments. Here’s a look at each category.
Government Benefits
Canada Pension Plan (CPP) and Old Age Security (OAS) are the core government-provided retirement benefits. CPP is based on your lifetime contributions, while OAS depends on your residency in Canada. These benefits are taxable, non-transferable, and end at death (unless supporting a spouse). Because of these limitations, they provide a basic income foundation but require supplemental sources. Still, they are guaranteed sources of income that will last your lifetime.
Employer Pensions and Savings Programs
Employer-sponsored pension plans can provide steady retirement income. Some employees are fortunate enough to have a Defined Benefit (DB) pension, which offers predictable, lifelong income. Others have Defined Contribution (DC) plans, also valuable, which depend on individual and employer contributions and investment growth. Upon retirement, employer savings programs (e.g. DC pensions or group RRSPs) are typically transferred into a Registered Retirement Savings Plan (RRSP) or a Locked-In Retirement Account (LIRA) for continued growth. That means that you become responsible for the investment management and for organizing the withdrawals during retirement.
RRSPs
RRSPs allow for tax-sheltered growth, offering significant retirement savings potential. By age 71 at the latest, RRSPs must be converted into a Registered Retirement Income Fund (RRIF) which has a minimum annual withdrawal requirement. These withdrawals are taxable, so it’s important to plan their use in coordination with other income sources.
Tax-Free Savings Accounts (TFSAs)
TFSAs allow tax-free growth and withdrawals, making them an ideal retirement income tool, especially for those in lower tax brackets or those who have maximized their RRSP. TFSA withdrawals do not impact income-tested benefits like OAS, making this account flexible and efficient.
Other Investments and Savings
Non-registered accounts, bank accounts, and Guaranteed Investment Certificates (GICs) provide additional retirement income options. While they offer flexibility, they are more taxable than TFSAs. It’s generally best to draw on these funds strategically to minimize tax impact.
You can read more articles about financial planning and other financial topics. If you have questions about this article or would like a conversation about how these ideas apply to your unique situation, call us at 403-290-0940.
About the Author
Robert Hurdman is a seasoned Canadian financial advisor holding both the Certified Financial Planner® (CFP) and Chartered Investment Manager® (CIM) designations. He is dedicated to creating personalized financial plans for families and individuals, so that they can enjoy retirement without financial worries. He uses a tailored approach to craft comprehensive strategies spanning investments, taxes, and estate planning. Robert's commitment extends to ongoing guidance, collaborating with experts, and fostering trust-based, long-term relationships that prioritize clients' financial well-being.
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The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was written, designed and produced by Robert Hurdman, for the benefit of Robert Hurdman, Certified Financial Planner with Quiet Wealth, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this blog comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.