5 Best Retirement Plans in Canada

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Retiring in Canada  


If you’re the type who likes to plan and prepare for the future, then you might be wondering what your best option is when it comes to retirement. Are there any savings plans that will give you the biggest bang for your buck? Or are there better options out there if you want to secure a comfortable and reliable income coming into old age? 

Fortunately, this isn’t something that everyone needs to spend time contemplating. 

That’s because Canada has some great retirement savings options available to all citizens. And if you’re interested in learning more about them, then keep reading. 

Here we’ll discuss the top five retirement plans in Canada and help you understand why they might be right for you. So, whether or not they meet your financial needs, take note of these opportunities so that when the time comes you can make an informed decision about which plan is best for you.

 

The Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) is a mandatory savings plan that all Canadians are required to participate in. It’s also known by its acronym, CPP, and is available to both employees and self-employed Canadians. The CPP is designed to provide a certain level of retirement income to people who don’t have other ways to save for their golden years. 

It does this by paying a monthly pension to qualifying individuals. The maximum amount you can earn from the CPP is $2,328. The CPP provides a great option for Canadians who don’t have enough money saved up to cover the basics of retirement like medical expenses, food, shelter, transportation, and more. 

While the amount you can earn from the CPP is extremely low, it’s still worth it because it’s mandatory. And while it’s not an ideal way to fund your retirement, it’s an important part of the Canadian retirement landscape.

If you’re interested in getting some extra money coming into your pocket once you retire, then the CPP could be a great option for you. This program is run by the federal government and provides 25% of your average earnings while you’re working to your qualifying age. 

Once you turn 65, you’ll be eligible to receive a monthly pension payment of up to $1253 (as of October 2021). This payment is meant to cover your basic living expenses and can be withdrawn from your pension as you see fit. However, it’s important to note that you must start taking the payment before you turn 67. So, if you want to receive this money before you retire, you’ll need to take the CPP at age 65.

 

Registered Retirement Savings Plans (RRSPs)

Registered Retirement Savings Plans, or RRSPs, are one of the best ways to save for your golden years. Simply put, you put money into an RRSP so you can make contributions to it throughout the year. 

Once the RRSP year is over, you can take out as much money as you want to use for whatever you want. The freedom to enjoy your rrsp withdrawal from your RRSP without any penalties is a great benefit to reap from this retirement plan. 

If you’re someone who likes to save but doesn’t want to feel compelled to do so, an RRSP is a great option for you. It allows you to keep up with your savings goals using your own funds. There are a lot of benefits to having an RRSP, but there are also several considerations to keep in mind.

​​With an RRSP, you can sock away money every year and then withdraw it when you’re ready. Once your money is locked away in an RRSP, it’s completely tax-free and can be withdrawn as cash at any time. 

If you make contributions to an RRSP each year, you could be eligible to receive a federal tax deduction on your contributions. So, you’re essentially putting money into your account and getting it back later with tax savings. 

If you decide to withdraw money from your RRSP after you retire, you can continue to take the funds as a withdrawal (or loan) until the age of 72. As long as you make sure to pay the withdrawn amount back by then, you can avoid paying interest on the funds.

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Registered Education Savings Plans (RESPs) 

Registered Education Savings Plans, or RESPs, are a type of investment plan that parents can contribute money towards to help pay for their children’s post-secondary (tertiary) education. They are similar to RRSPs in that they are voluntary tax-advantaged investment plans that allow you to contribute to them throughout the year and withdraw any funds later on. 

However, while RRSPs are available to both employees and self-employed individuals, RESPs are only available to parents. There are a lot of benefits to having an RESP, but there are also several considerations to keep in mind. 

As long as the money stays in the account, it’s completely free of any taxes. And because it’s a registered plan, it can be withdrawn as cash at any time as well. 

If you choose to withdraw some funds before you retire, you can still do so without paying any interest. And because it’s a registered plan, the funds you withdraw can be used for any qualified education expenses such as tuition, books and supplies, and even living expenses.

Tax-Free Savings Accounts (TFSAs) 

A Tax-Free Savings Account, or TFSA, is a great way to put money away for your future. Unlike with other savings plans, you won’t have to pay any taxes on the money you contribute to a TFSA. This means you can save a lot more money in a TFSA without incurring any extra costs. 

They are also allowed to be used as a source of income in retirement. You can withdraw the money from your TFSA as you would from any other savings account. There are a lot of benefits to having a TFSA, but there are also several considerations to keep in mind. 

A TFSA is a special account that you can use to save for anything you want. There’s no specific purpose to putting the funds in a TFSA, so you can use this account for whatever you want. 

The great thing about a TFSA is that it’s completely tax-free when withdrawn, so there’s no interest to pay. And since there’s no specific purpose for the funds, you can place them in a number of different places. 

So, you can use them to pay for a down payment on your next home, make repairs to your car, or even add some extra funds to your retirement savings account.

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The Old Age Security Program (OAS)

The Old Age Security Program, also known as OAS, is a program that allows individuals who are older than 65 to receive a certain amount of money from the Government of Canada. 

Individuals who fall under this category are called contributors to the OAS. The OAS is divided into two payments. The first is the base amount and the second is the adjustment amount. OAS is provided as a monthly payment. 

The base amount is the amount you receive when you turn 65. The adjustment amount is adjusted every year based on the cost of living. There are a lot of benefits to having the OAS, but there are also, as with all the other Retirement Plan options in Canada, several considerations to keep in mind. 

The Old Age Security program is completely free to all qualifying individuals. To qualify for the OAS, you don’t need to be working full-time, you just need to be earning enough money to be able to afford basic living expenses. And for most, that comes to about $35,000 annually.
 

Summary

The best retirement plans in Canada are the Canada Pension Plan, Registered Retirement Savings Plans, Registered Education Savings Plans, and Tax-Free Savings Accounts. 

The CPP is the best retirement plan because it’s mandatory, it provides a consistent amount of money, and it’s available to people who don’t have enough money saved for their retirement. 

You can also contribute to an RRSP and an RESP, which provide you with extra money that you can use for your retirement needs. 

Finally, a TFSA is the best retirement savings plan because it’s tax-free and you can use it for either retirement or as a source of extra money.

If you’re interested in getting some extra money coming into your pocket once you retire, you may need to consider setting up one or two of the Retirement plans as mentioned in this article, to make double sure that you are ready for it all, come what may. 

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