Know Your Retirement ABCs

Know Your Retirement ABCs https://learningcentre.statefarm.ca/family/finances/know-your-retirement-abcs/ bb3 Jul 19, 2012

By Staff Writer State Farm™ Employee

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If you want to have a comfortable retirement, experts say your income sources should provide about 75% - 85% of what you received while working. Sort through the acronyms to identify the programs that apply to you, then work with a financial professional who can help you determine if you’re on track.

Government Plans

  • Canadian Pension Plan (CPP) - This program, or its equivalent in Quebec, the Quebec Pension Plan (QPP), is designed to provide you with monthly payments as early as age 60. How much you’ll receive depends on your age, your pre-retirement income, and your contributions to the program over the years. Your monthly benefit will be greater if you delay taking withdrawals until after age 65.
  • Post-Retirement Benefit (PRB) - People ages 60 to 65 who are receiving CPP payments but still working must contribute to the PRB. (From age 65 through age 70, contributions are elective.) Like the CPP, this new benefit is indexed to the cost of living, so your pension income will gradually increase over your lifetime. According to Service Canada, benefit payments start the year after you begin contributing.
  • Old Age Security (OAS) - OAS benefits are available to Canadian citizens who are 65 or older and who have lived in Canada a minimum of 10 years after the age of 18. You may begin receiving OAS benefits before you retire.
  • Guaranteed Income Supplement (GIS) – Retired Canadian citizens who are currently receiving OAS and have a lower income may qualify for supplemental benefits from the GIS. These payments are non-taxable and a yearly income review is conducted for eligibility.

Savings

  • Registered Retirement Savings Plan (RRSP) – RRSPs are tax-advantaged retirement accounts that let you put your savings into a variety of financial vehicles. Your contributions to an RRSP are generally tax deductible to a maximum annual contribution level.
  • Tax-Free Savings Accounts (TFSA) – All investment income – interest, dividends, and capital gains – accumulate tax-free, even on withdraw. Visit the Government of Canada’s website, for information about contribution limits and eligibility requirements.

Other Income Sources

  • Registered Retirement Income Funds (RRIF) – When you turn 71, you’re required to close your RRSP. Instead of taking the funds in cash and paying taxes on them, many retirees choose to convert the funds to an RRIF. RRIFs allow investments to continue to grow with a minimum RRIF withdrawal amount required each year.
  • Single Premium Immediate Annuities (SPIAs) – Similar to the RRIF, funds from the closed RRSP can be transferred into a SPIA, which guarantees the retiree a steady stream of income for life.

Want to learn more about retirement income options? Visit the Canadian Revenue Agency or go to the online planning calculator from Service Canada.

Disclosures

*Mutual Funds are not insurance products and are distributed through representatives of State Farm Investor Services (Canada) Co. State Farm Investor Services (Canada) Co. is a separate legal entity from State Farm Mutual Automobile Insurance Company, or any of its insurance affiliates.

Please read the applicable simplified prospectus before Investing. Commissions, trailing commissions, management fees, and expenses may be associated with mutual fund investments.

Mutual Funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer.

Neither State Farm nor its agents provide tax, legal or investment advice. Please consult a tax, legal or investment advisor for advice regarding your personal circumstances.