If you’re asking the question “How much money do I need to retire in Canada comfortably?” know that you’re not alone. This question happens to be the most asked question around retirement next to “When should I start receiving my CPP benefits?”

Everyone’s situation is different and there are a lot of factors that go into answering this question: your age at retirement, your lifestyle, your pension, your OAS amount, and of course a lot more.

In this video, I’ll show you:

✅ The #1 thing retirees do to have a successful retirement

✅ 3 steps you can take now to get back on track for retirement in Canada

✅ 3 areas to avoid that will Kill your retirement in Canada

✅ 2 case examples of actual client’s retirement experience in Canada

✅ The #1 step you need to take to have enough money to retire in Canada

Learn when is the best time to start taking your CPP payments with guest speaker Scott Edgington.

Taking CPP early or deferring until age 70 is a common question with pre-retirees. It’s important to speak with your financial advisor and work through a financial plan.

Knowing in advance your income needs and the projected income of your investments is key to understanding when to begin receiving your CPP benefits.

If you’re like many Canadians, deciding when to begin receiving CPP payments is confusing. In this video, I’ll show you the break-even point for CPP, areas of concern to consider when to taking your CPP benefit, and a live walk-through of the governments’ Retirement Income Planning tool.

The first and most important consideration is; do you need the money? There’s really no point in calculating the break-even on collecting CPP when no matter the result, the issue is you need the income as early as possible.

The next consideration is Longevity. If you have a family history of living to older ages, say well into your 90’s, then delaying your CPP until age 70 is in your favor. However, early family history of deaths suggests taking CPP early to receive at least some benefit. If you choose to take CPP at age 65 vs age 60 it would take 106.7 months to reach break-even.

If you choose to delay until age 65 then by the time you reach age 73.9 you’re now benefiting financially from the increased monthly payments.

Everyone’s situation is different, and having a discussion with your advisor about your income need is the best course of action.

When planning retirement income, it’s important to understand the government benefits you might be eligible to receive. These benefits are generally Canada Pension Plan, Old Age Security, and Guaranteed Income Supplement.

Canada Pension Plan is a contributory plan that provides guaranteed indexed income in retirement. It can be started as early as age 60 and deferred until age 70. Currently, the maximum monthly CPP at age 65 is $1,175.83 and the average amount is $672.87. If clients don’t know how much they’ll be receiving, I usually ask how long they will have been contributing to CPP when they reach age 65.

If the answer is 20 years, a good rule of thumb is to divide the 20 years by the maximum required contribution period of 40 years. In this example, it’s 20/40 so the client could expect 50% of the benefit at age 65. This assumes they’ve been making the maximum CPP contribution each year. Remember, this is just an estimate and, if possible, the client can go to Services Canada and get the exact amounts for you.

Old Age Supplement (OAS)

If you’ve been living in Canada for 40 years or more after your 18th birthday, you will qualify for the full OAS. If not, you can use the same logic as we used above to determine your partial payment. For example, if by age 65, you will have lived in Canada for 30 years, you can expect 30/40ths or 75% of the benefit. Right now, the maximum OAS is $613.53, so you could expect approximately $460.

OAS has another feature which results in a reduction in payments when a person’s net income is above $79,054 (for 2020). For every dollar above this amount, 15% of OAS is clawed back. In the extreme case, if some reported net income of $128,136, all of their OAS would be clawed back ($613.53 x 12/15% = $49,082 + $79,054 = $128,136).

Here’s a good table with the OAS and GIS details.

One last number for you, $58,700, this is the 2020 YMPE, or Yearly Maximum Pensionable Earnings. This number is the amount after which, no more CPP premiums are collected.

Business Owner Tip:

Business owners should consider T4 themselves this amount each year to maximize their CPP contributions. If they are only taking dividends, they will not be making CPP contributions. Only paying dividends will disqualify the business owner from using an Individual Pension Plan (IPP) as a retirement vehicle. Your accountants can help you decide which is better.

Let me know your thoughts below.