Wednesday, February 14, 2018

JUMP START YOUR RETIREMENT PLANNING.

January rings in the period of the year in which you are the most solicited concerning retirement savings vehicles. So Retraite Québec is holding a campaign on the importance of financial planning for retirement. Check out jeplanifie.gouv.qc.ca, and use the information to reflect on your retirement. The various calculation tools on the site can also help you plan.

Have you already begun planning your retirement? Is it something you think about sometimes, often, all the time or never
Thinking about your retirement is easy. Planning it financially takes a little more effort, but it’s really worth it. To do it well, you first need to answer a series of questions about retirement and your finances. Here are two that you should be able to answer if you want to better plan for retirement.

1. At what age do you plan to retire?

 First and foremost, to choose your retirement age, you must be familiar with your financial situation. Assessing your current financial situation will allow you to validate whether the age at which you wish to retire is realistic. You may decide to lower your expenses or save more to achieve your financial goals. After that, you may decide to adjust your work to your target retirement age.

The fact remains, however, that consulting a financial planner to give you a game plan will help you determine the best time to retire.

2. What are the various sources of income to which you will be entitled when you retire?

Retirement income comes from three main sources:
  • Old Age Security
  • Québec Pension Plan
  • Your employer’s pension plan, your RRSPs or your TFSAs, according to your situation.

Old Age Security pension

The Federal government's Old Age Security program offers a basic yearly pension of around $7000 per person age 65 years and over. That amount corresponds to approximately 15% of your retirement income. There’s also the Guaranteed Income Supplement (GIS), but you’re only eligible for it if your family income is less than $42 624.

Québec Pension Plan

The Québec Pension Plan (QPP) replaces 25% of the income on which you contributed. In 2018, the maximum employment earnings on which you can contribute is $55 900. However, it is unlikely that you’ll have contributed your whole life on maximum earnings, which means that you will not necessarily have the maximum pension.

What is important to know is that the percentage and the pension amount vary according to the age at which you retire, as shown in the following table.

Retirement age
Percentage of the maximum pension
Maximum yearly pension in 2018
60
64%
$8710
65
100%
   $13 610
70
142%
   $19 326

Your employer’s pension plan, your RRSPs or your TFSAs

The Old Age Security program and the Québec Pension Plan will cover 40% of an average income of $55 900. According to Retraite Québec, you will need 70% of your average income to ensure a suitable retirement. You will therefore need to save enough to cover the other 30%, whether with your employer's pension plan, RRSPs or TFSAs.

Even today, not all workers have the opportunity to have savings deducted from their pay through an employer-offered pension plan. However, since 31 December 2017, businesses with 10 or more employees that do not offer a voluntary retirement savings plan (VRSP) have been required to implement a VRSP or another group retirement savings plan that meets certain conditions. Find out what’s happening in your workplace, and be sure to get on board!

Check out our campaign website at www.jeplanifie.gouv.qc.ca to get informed of the options available for your retirement and start planning now.

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