Private Pension
Only 37.1% of Canadians belong to a pension plan1, and those plans are being scaled back as employers reduce costs. In most cases, you will need retirement income beyond your private pension.
CPP/OAS
The federal government has made changes to the Canada Pension Plan (CPP) and Old Age Security (OAS) with significant implications for Canada’s retirees. CPP changes include increased contribution rates for employees and employers, resulting in increased benefits for future retirees.2 However, studies show that government-provided benefits will not be enough to cover basic everyday expenses.3
RRSPs/RRIFs
Registered Retirement Savings Plan (RRSPs), which must be converted to Registered Retirement Income Funds (RRIFs) in the year you turn 71, are an important tool for retirement income, yet only 5.9 million Canadians contributed to an RRSP in 2019.4 Be sure you are maximizing your savings through this tax deferral strategy.
TFSAs
Tax-Free Savings Accounts (TFSAs) are another good way to set aside tax-free retirement savings while you are working. Canadian tax filers are missing a good opportunity to save for retirement with an average of $34,165 per person in unused TFSA contribution room in 2018.5
Non-Registered Savings
Many people also use savings accounts, GICs, term deposits, mutual funds and other savings to support their retirement income.
Home Equity
Your home equity can be a part of your retirement income; however, it likely won’t be enough on its own to fund retirement and may have other planning implications. Even in combination with government-provided benefits, you may need other sources of income.6
Inheritance
According to Angus Reid only about 5% of Canadians expect to derive some income from an inheritance.7 Depending on your circumstances, counting on an inheritance alone may be risky.
1. Statistics Canada: Pension Plans in Canada, as of January 1, 2020.
2. http://www.moneysense.ca/news/details-of-increased-cpp-premiums-released/
3. Canadian Institute of Actuaries: Planning for Retirement: Are Canadians Saving Enough?
4. Statistics Canada: Tax-Free Savings Account statistics (2018 tax year)
5. Canada Revenue Agency: Tax-Free Savings Account statistics (2018 tax year).
6. Canadian Institute of Actuaries: Planning for Retirement: Are Canadians Saving Enough?
7. Angus Reid Institute: Retirement in Canada: Lots to Enjoy About ‘Golden Years’ but Financial Worries Loom Large – Especially for Those Still Working, Angus Reid Institute, July 2015