Where will your retirement income come from?

January 4, 2016

Know your sources of retirement income and how they work together.

Sources of retirement income

For most Canadians, the likely sources of retirement income will include government benefits, registered retirement savings, non-registered savings and company pensions.

Your government benefits will generally consist of Old Age Security (OAS) and Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) payments. According to Service Canada, the average combined CPP and OAS benefit is currently about $14,500 per person per year. You’ll also receive the Age Amount, which isn’t a paid benefit but rather a federal non-refundable tax credit given to every taxpayer who is 65 or older at the end of the year.

Some provinces provide additional benefits for retirees, particularly lower-income earners. Your advisor can provide you with more information specific to your province and situation.

Your registered savings are whatever you’ve saved in a Registered Retirement Savings Plan (RRSP), Registered Pension Plan (RPP) or Tax-Free Savings Account (TFSA). Your non-registered savings include everything else, like money you have in a savings account, “open” investment account or invested in your home.

If you’re not sure if you have a company pension plan, speak to someone at your company’s Human Resources department.

About clawbacks

If you’re counting on government benefits as part of your retirement income, keep in mind that OAS and the Age Amount are dependent on how much you earn. If your income is too high, these benefits may be reduced (or “clawed back”) or eliminated altogether.

For more information on the OAS and Age Amount thresholds, visit the Service Canada website.

To minimize the impact of both Age Amount and OAS clawbacks, it’s a good idea to have multiple sources of income in retirement: fully taxable (RRIF, pensions, CPP, OAS), tax-preferred (dividends, capital gains) and non-taxable (TFSA, return of capital). Your advisor will work with you to create a plan that maximizes your retirement income while minimizing clawbacks.

To learn more about your retirement income, including government benefits, talk to your financial advisor or visit AGF.com/RRIF.

The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

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