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What are the Canadian Retirement Plans? Meaning, Strategy, Schemes, and Much More

6 min

Name any person who is happy even on Monday. Retired! We have always dreamed of a life where we won’t have to follow our clock-in and clock-out corporate routine. It isn’t about at what age you decide to get retired, it’s about at what income. People in their 20s might not give a second thought about planning retirement, as there are plethoras of things that are on priority. But retirement can last longer than you think. Are you prepared?

To enjoy the second innings of your life without getting stressed about financial stability or not having sufficient funds, you’ll need a perfect financial strategy. Your retirement should be able to cover all your monthly expenses so you can live with peace of mind.

Canada is expensive, but don’t worry! Here we have listed the best retirement plans to help you save enough funds for your retirement in Canada.

What does a retirement plan exactly mean? 

A retirement plan is a personal investment plan designed to save funds for your post-retirement days. A reliable retirement plan will help you live a stress-free life by providing you with a regular income to enjoy in your retirement.

Reap the benefits of a seed you had sown.

From the day you have to apply for or buy a retirement plan, you will start contributing a certain amount from your income regularly. When your income stops, that is when you get retired, you will start getting steady funds from your retirement plan. Mostly, retirement plans also cover life insurance plans. So, along with wealth accumulation, it will also cover your life insurance plan. 

Retirement income system in Canada 

You will get steady funds from mainly these three sources in Canada:

  1. The Old Age Security (OAS) 
  2. The Quebec Pension Plan (QPP) or The Canada Pension Plan (CPP) 
  3. Employer-Sponsored pension plan and personal savings & investments 

These three have been deemed as three primary pillars of Canada’s retirement income system. Planning retirement is crucial, you should know with what income you’ll get retired. You’ll also have to plan your savings to get a steady income at certain stages in your life.

Quebec pension plan (QPP) or Canada Pension plan (CPP)

The Quebec pension plan (QPP) or Canada Pension Plan (CPPP) offers monthly payments when you contribute a certain amount of funds during your working years. The CPP plan is managed by the Canada Pension Plan Investment Board (CPPIB). The CPPIB management invests these contributions and ensures whether there are enough funds in the plan to offer steady income to both current and future retirees.

The amount you get on monthly bases varies on how long you have invested and how much you have invested in the plan. You can avail of this plan as early as 60 or as late as age 70.

The Old Age Security (OAS) pension 

The OAS pension is a personalized monthly benefit investment plan for Canadians who are 65 or older. You can also enjoy the benefits of this plane even while working or have never worked. The best thing is that you don’t have to invest in the OAS pension to benefit from it. You are only eligible for the Old age security pension plan if you’re a Canadian legal citizen, and living in Canada for at least ten years. In the OAS pension plan, the amount of money you will get from this plan depends on how long you lived in Canada after the age of 18. You won’t have to apply for the Old Age Security plan, you probably be selected for auto-enrolment in the OAS pension. If you’re chosen, you’ll receive a letter as you turn 64 years old.

Guaranteed Income Supplement (GIS) 

The GIS (Guaranteed Investment Supplement) plan offers a monthly non-taxable benefit to the (OAS) Old Age Security recipients who are Canada’s citizens and have low incomes. To be eligible for a GIS pension plan, you must file your income tax return timely every year. If you’re already enrolled (automatically chosen) for the OAS pension plan, you’re also eligible for the GIS pension plan as long as you’re filing your income tax returns every year.

Employer-sponsored retirement and pension plans 

In this pension plan, your employer may sponsor a retirement plan, such as Registered Retirement Savings Plan (RRSP) or a Registered Pension Plan (RPP). These plans will provide Canadians with a decent source of income during their retirement. In Employer-Sponsored retirement and pension plans, both employer and the employee timely contribute money to the plan. When you stop working, you’re eligible to get regular monthly income.

How to turn your savings into a retirement income?

It’s important to decide how you want to convert your investments and savings into retirement income. You’ll need to work on it before you hit your retirement in the early days so you can have a clear understanding of what your options are and how much money you may have- 

  1. Turning your RRSP into RRIF ( Registered Retirement Income Fund) 
  2. Applying for annuity 
  3. Investing money in other products, such as bonds or stocks 
  4. Withdrawing your savings as cash
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