Published by Leonardo Calcagno
When it comes to retirement, most Canadians know they should be thinking about their pension – but many aren’t quite sure how to make the most of it. The rules seem confusing at times, and the choices you make affects your income for the rest of your life.
Fortunately, a few simple strategies go a long way. You will build a stronger and more reliable retirement income by understanding how government benefits work. Making the most of your contributions is also vital.
Here are three practical – and effective – tips to help you get the most out of your pension.
Delay CPP Payments
One of the biggest decisions that retirees face is when to start taking CPP – Canada Pension Plan. You could begin receiving payments as early as age 60. This doesn’t mean you should, though.
If you begin CPP early, your monthly payments are permanently reduced. However, if you delay taking CPP past the age of 65, then your benefit increases. It increases each year you wait, up to age 70. This could boost your payments by as much as 42% compared to starting at 65.
Delaying CPP is a powerful strategy for the following people:
- Those who are still working
- Those who have other income sources
- Those who don’t need the money right away
A larger monthly payment later in retirement could help protect you against the risk of outliving your savings.
Of course, everyone’s situation varies. You need to consider various aspects – health, lifestyle, and other retirement income – before making a decision.
Understand OAS Timing
Old Age Security (OAS) is another important piece of the retirement puzzle for Canadians. Most people become eligible for OAS at 65 years old. Like CPP, you could choose to delay this, too.
Your payments increase slightly for each month you delay OAS past age 65. If you wait until age 70, then you could receive a maximum increase of 36%.
However, timing matters for another reason – taxes. Higher-income retirees may face the OAS “clawback,” which reduces benefits once income passes a certain threshold. Planning when to start OAS helps reduce the chances of losing part of this benefit.
So, take a thoughtful approach to OAS timing. It could make a meaningful difference in how much income you’ll receive over the course of your retirement.
Max Out Contributions
While government benefits are helpful, they were never meant to cover all retirement expenses. That’s why personal savings play such a crucial role. And you shouldn’t forget that.
Registered accounts – such as RRSPs and TFSAs – allow Canadians to grow investments in tax-efficient ways. Contributing as much as possible – particularly during your working years – significantly improves your financial flexibility later on.
Even small, consistent contributions add up over time, thanks to compound growth. The earlier you start, the more time your savings have to work for you.
If you’re unsure how to contribute or how to structure your retirement income, you aren’t alone. Speak with a professional. This will help. Working with experienced planners – like Aleph Retirement Planners – provides you with tailored guidance.
To conclude, retirement planning shouldn’t be complicated. This should be an enjoyable part of your life. Only through the right planning and knowledge will you create a more secure and comfortable future.