What's your vision of retirement
What's in this issue:
| Download this newsletter [PDF, 3 pages, 273 KB] |
What’s your vision of retirement?
The quality of life you’ll live in retirement will largely be determined on the planning you do today. Whether you have 20, 30 or 40 years until retirement, there are things you can start to think about today, to make your golden years truly so.
What would you most like to do if you had more time or resources? Think about the activities you enjoy:
- Hobbies — restoring old cars, gardening, painting or writing a novel
- Volunteer work — volunteering for a charitable organization or a cause close to you
- Learning — going back to school or learning another language
- Career — starting a new business or becoming a consultant or coach
- Relaxing and enjoying life — reflecting, reading, quiet time
If you work at all during retirement, it should be because you choose to, not because you have to. Unfortunately, the reality is that many retirees need to work during retirement, to supplement their retirement income.
Generally speaking, you’ll need between 65% and 80% of your pre-retirement income during retirement. Work-related expenses will likely drop, while expenses such as health care will likely rise. Let’s take a look at sources of retirement income, and how you can start to build your retirement plan.
There are generally several sources of retirement income.Primary sources include: your company-sponsored pension plans, your personal RRSPs.
Company-sponsored pension plans fall into two categories:
- Defined benefit (DB) plans provide a pre-set guaranteed benefit at retirement, based on a formula that considers years of service and earnings. The investment decisions are taken care of for you. If you have participated in a DB plan, you’ll begin to receive monthly payments at retirement. Your pension plan administrator should be able to provide an estimate of how much you’ll receive at retirement.
- Defined contribution (DC) plans are savings accumulation plans and generally include an employer matching contribution. The amount you’ll be able to draw as income from your DC pension savings will depend on how much you’ve saved, how you invested your money, and the withdrawal rules for your province of employment. The benefit amount at retirement is not guaranteed.
Secondary sources include your personal non-pension savings, such as:
- Assets in an employer-sponsored deferred profit sharing plan (DPSP)
- Personal RRSP savings (outside your company-sponsored plan)
- Any non-registered savings
- Other assets, such as your home
Supplementary sources include: payments from government programs such as the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS). These payments will likely account for a small portion of your total retirement income. Here’s a summary of the key features* of CPP/QPP and OAS.
CPP/QPP |
OAS |
|
Payment frequency |
Monthly |
Monthly |
Eligibility requirements |
|
|
Automatic payments? |
No – you must apply |
No – you must apply |
Maximum monthly payment |
$844.58 |
$484.63 |
Average monthly payment |
$463.95 |
$460.83 |
Indexed to changes in the cost of living? |
Yes – annually |
Yes – quarterly |
Maximum income threshold? |
No |
Yes – payments are reduced when you reach about $62,000 in net income, and drop to zero at an income of about $100,000 or more. |
Is the benefit taxable? |
Yes |
Yes |
Can you receive the benefit if you live outside Canada? |
Yes – fully portable |
If you are a Canadian resident for 20 years or more, the benefit is fully portable If you are a Canadian resident for less than 20 years, the benefit is portable for 6 months only |
Source:www.sdc.gc.ca, figures current as of June 2006.
You can start your CPP/QPP Pension payments as early as age 60 or as late as age 70, but your payments will be reduced or increased accordingly. Your CPP/QPP statement will provide you with your estimated payment at age 65.
By factoring in any income you’ll receive from employer pensions and government benefits, you’ll be able to more accurately determine how much you’ll need to save through your company-sponsored group pension and savings plans to make up the difference. Depending on your individual circumstances, you may also be eligible to receive other government payments.
*For more information, visit www.sdc.gc.ca. In Quebec, visit www.rrq.gouv.qc.ca .
If you have a general question or suggestion about this newsletter, please send an e-mail to can_pencontrol@sunlife.com or write to At a Glance Newsletter, Group Retirement Services Marketing, Sun Life Financial, 225 King Street West, 14th floor, Toronto, ON M5V 3C5.This bulletin has been created exclusively for you. It addresses issues to help you with your financial planning and investments.
Group Retirement Services are provided by Sun Life Assurance Company of Canada, a member of the Sun Life Financial group of companies.
Last Update: July 2006
