JUL 27: BEST FROM THE BLOGOSPHERE

Life without savings “difficult, but not impossible,” experts say

Like many things in life, such as quitting smoking or losing weight, saving for retirement – even though it is good for us – is often difficult to do.

Jobs aren’t as plentiful these days, household debt is at record highs, and there just isn’t always a lot of cash for putting aside long term.

But what kind of retirement will people who can’t or didn’t save face when they’re older?

According to a recent article in MoneySense, life without retirement savings (or a workplace plan) is “difficult, but not impossible.”

Canadians who have worked and paid into the Canada Pension Plan (CPP) can, in 2020, expect a maximum annual pension of “$1,176 per month – that’s $14,112 per year,” the article notes. However, the writers warn, not all of us will have worked long enough (and made enough contributions) to get the maximum.

“The average CPP retirement pension recipient currently receives $697 per month, or $8,359 per year. That’s only about 59 per cent of the maximum,” reports MoneySense

You can start getting CPP as early as 60 or as late as 70, and the longer you wait, the more you get, the article notes.

All Canadian residents – even those who don’t qualify for CPP – can qualify for Old Age Security (OAS). If you don’t remember paying into OAS, don’t worry – you didn’t directly pay for it via contributions. Instead, the OAS is paid from general tax revenues.

“A lifetime or long-time Canadian resident may receive up to $614 per month at age 65 as of the third quarter of 2020, which is $7,362 annualized. OAS is adjusted quarterly based on inflation,” MoneySense reports. 

There’s another government program that’s beneficial for lower-income retirees, MoneySense notes. The Guaranteed Income Supplement (GIS) “is a tax-free monthly benefit payable to OAS pensioners with low incomes. Single retirees whose incomes are below $18,600 excluding OAS may receive up to $916 per month, or $10,997 per year, as of the third quarter of 2020.”

What’s the bottom line? Someone qualifying for any or all of these programs can receive up to $23,721 per year, with “little to no tax required” per the rules of your province or territory.

The article notes that those saving $10,000 before retirement could add $25 to $33 a month to that total. Those saving $50,000 could see an additional $125 to $167 a month, and those putting away $100,000 will have $250 to $330 more per month.

The takeaway from all of this is quite simple – if you are expecting a generous retirement from CPP, OAS, and GIS, you may be in for a surprise. It’s not going to be a huge amount of income, but it’s a reasonable base.

If you’re eligible for any sort of retirement benefit from work, sign up. You won’t miss the money deducted from your pay after a while and your savings will quietly grow.

If there is no retirement program at work, set up your own using the Saskatchewan Pension Plan. Start small, with contributions you can afford. Dial up your contributions every time you get a raise. With this “set it and forget it” approach, you’ll have your own retirement income to bolster that provided by government, which will give you a little more security in life after work.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.

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