RRSP, PENSION PLANS, PASSIVE INCOME AND SAVING FOR YOUR FUTURE:
Today I will be exploring the topic of retirement, why you should be thinking about retirement, how to get more information about your retirement plan and types of plans and tools that will help you retire successfully. The information below is from my own background and experience with retirement plans. It is important to understand that everyones retirement plans will be different due to various factors such as how early one began contributing to their pension and/or RRSP, individual investments such as Stock and real estate investing and more.
I hope this blog inspires you to think about your retirement plan and start looking at ways to invest in your future.
1) Canada Pension Plan
The Canada Pension plan is a program that most Canadians with 39 years of working history will qualify for. Some employers do not guarantee adequate pension plans. The amount you receive varies based on how much you have contributed and worked over the years. The higher the income the more likely you are to contribute more money. Currently, the maximum monthly amount you can receive at age 65 is $1,203.75, though the average monthly amount is a low of $614.21 (Ontario Government, 2019).
You can see how much you are contributing to your pension plan on your pay stubs to get an estimate of how much you will end up with when you retire. Your contributions will vary as your income increases and as you change employers. Many people try to gain jobs within the government sector to ensure they will have an adequate pension.
2) Registered Retirement Savings Plan
The Registered Retirement Savings Plan (RRSP) is a retirement savings and investing plan for employees and self employed individuals. This allows your funds to grow tax free until you withdraw.
RRSP's are great because many companies will match your contributions which will help double your retirement funds. Secondly, the Canada Pension Plan will not be enough money to live comfortability on so having extra RRSP funds available will help maintain your lifestyle.
Thirdly, Your contributions reduce your annual income tax! Which is always a plus!
Lastly, you are able to set up your RRSP as a monthly payment when you retire to help budget your money and make you feel like you are still getting paid similar money that you where receiving during employment.
3) Tax-Free Savings Account
A TFSA is also a tax free stream for money. TFSA's allow you to set money aside in eligible investments and watch those savings grow tax-free throughout your lifetime. Your savings can be withdrawn from your account at any time, for any reason tax free.
TFSA's are good for long term goals such as buying a home, large investments and retirement especially if you have reached your yearly RRSP limit which is currently $6,000 per year of contributions.
4) Passive Income
Passive income is a form of retirement because it generates long term generational wealth. This includes regular earnings from a source other than an employer. A popular example of passive income is a rental property; this is a great investment that can generate an extra $1000-$2000 a month for retired individuals.
5) Seeking a Professional
I hope all the information above has helped you realize that we should all be thinking about ways we can make our retirement an easy transition. If you want more information on how to ensure you are utilizing your companies RRSP plans and contributing to your pension reach out to your Human Resources department and get all the details to your plan.
You can also reach out to a financial advisor, especially if you are self employed. Make sure you are saving enough and have the best retirement plans in place to ensure you can retire on time.
All the Best,
-Coll