Retirement plans: Are there government benefits in old age?

by the FlexFi Team

As the old Chinese proverb goes (Or Greek, or French, who really knows), “the best time to plant a tree was 20 years ago. The second-best time is now.” The idea is that it’s never too soon to think about the future; when it comes to money, it’s never too soon to start planning for retirement. 

Aside from the fact that it’s never too soon to start planning for retirement, it’s also the fact that you can never have too much money for retirement. To that end, we’ll be talking today about two of the benefits offered by the Canadian government to help us with our retirement. Before we begin, we’d like to stress the fact that these benefits will help you in retirement, but are unlikely to be all you’ll need to sustain the lifestyle you’d like. It’s still important to have your own retirement plan beyond the standard government benefits in old age. 

Canada Pension Plan

The Canada Pension Plan (CPP) is a public pension program which is paid into by people in Canada who pay into it during their working years. When you pay taxes every year, you’ll notice that a portion of your payment to the government actually includes a payment into the CPP.

Eligibility – You can start receiving the CPP at minimum age 60. Additionally, you need to have made at least one contribution into the CPP. That’s it! However, you will need to actually apply for it as you won’t automatically start receiving it once you hit the age of eligibility.

Amount – The CPP is calculated based on the amount of your contributions. The more you’ve put into it, the more you’ll get back out. One benefit granted by the CPP is that when calculating your average contributions, they’ll remove the 8 years of lowest contribution from the equation. Essentially, this means that what you receive from the CPP will be higher! It benefits everybody.

For more information about the CPP, eligibility, and calculating how much you’ll receive you can read more on it here.

Old Age Security

The Old Age Security (OAS) is the largest pension program from Canada.  It’s funded by the general tax revenues from the CRA, so technically, we are not paying into it directly. 

Eligibility – You will receive the OAS at the age of 65. This program is automatic, meaning that you don’t need to do anything in order to receive it. However, the eligibility is interesting. It doesn’t require you to have worked in Canada at all, and is instead determined by how long you’ve lived in Canada, out of a maximum of 40 years. 

Amount – Because the amount received in based on time lived in Canada, The OAS is calculated by seeing how many years out of a max of 40 that you’ve resided in Canada after the age of 18.  For example, if you moved to Canada at 45, and started to receive the OAS at 65, that means you have lived in Canada for 20 years, which will allow you to receive 20/40 or half of the full OAS amount. 

For more information about the OAS, eligibility, the calculating how much you’ll receive, visit the CRA website here. 

Your Own Planning

Most importantly, the benefits offered by the government will not be enough! Make sure you start thinking about your own retirement and putting something into place for yourself. With the added bonus from the government, you’ll be on your way to a comfortable and stylish retirement lifestyle. 

FlexFi Inc. is not a financial advisory firm.
This article is for informational purposes only and is not a substitute for individualized professional advice.

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