The job structure in Canada has dramatically changed over the last few decades. There has been an unforeseen rise in career pivoting, contract work, and job-hopping. However, the recent professional trends are rather unevaluated, and their future implications remain unexamined. As such, it is time to get rid of a myopic vision and plan something for the long term. It is such a background that we have to analyze the retirement plans in Canada. Statista Canada says that merely 37 percent of working Canadians are covered by a pension plan, and a vast majority of the retirement savings are self-driven. Therefore, we can clearly witness the pressing need for proper retirement planning, the first step of which is knowing the best retirement plans. So, without further ado, let us glance through the top retirement plans that can truly make a difference.
A registered retirement savings plan (RRSP) is tax-sheltered retirement savings account available to Canadians under the age of 71 who have earned income and filed a tax return. Stocks, bonds, exchange-traded funds, etc., can all be held in RRSP accounts.
It is a retirement pension that offers a monthly, taxable benefit to help Canadian citizens supplement their income post-retirement. It is mandatory to pay into the Canadian Pension Plan for the entire stint of your earning years, and it is designed to replace 25 percent of your pre-retirement income. While the maximum amount you can receive is CAD 1203.75, the average CPP Canadians receive is CAD 689.17.
It is a benefit program funded by general tax revenue and provides monthly, taxable payments to senior Canadian citizens. The best part about OAS is that as it is purveyed under tax revenues, every Canadian citizen qualifies for this monthly pension once they turn 65 – whether or not they have ever been employed or are currently employed. As of July 2022, senior citizens above 75 will see an automatic 10 increase in OAS.
It is a pension plan that caters explicitly to lower-income individuals. It is a tax-sheltered old-age benefit for senior citizens who require additional monetary assistance. A person’s income tax declarations determine the qualification for GIS. Single, widowed, or divorced seniors can receive a maximum GIS of CAD 919.12 per month.
Under some plans, employers exclusively contribute to a vested retirement plan, which we call an employer pension plan. A person is eligible to withdraw the amount after they leave service after a certain number of years.
Another reliable retirement plan is the very simple TFSA, which acts like any other savings account. Citizens set aside whatever money they want and can remove it whenever necessary without penalty. What sets TFSA apart from a conventional savings account is that the money in the former accrues more internet than usual.
It might come as a surprise that there are significant merits of home ownership in Canada. Homeownership in the country is an excellent instrument for retirement savings. Senior citizens who want to downsize their homes after their kids move out can do the same to free up equity, which can be used in retirement.
So, there we have it, a crisp overview of the seven best retirement plans in Canada.
Ideating self-driven retirement plans can be simple, with some easy tricks and tips.
Although it is good to live in the moment, some future planning, especially concerning savings, is essential. If you feel overwhelmed by the nitty-gritty of curating a retirement plan, some assistance from a Canadian financial advisor might help.
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