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Retirement Planning in Terrace BC: Take Control of your Financial Future!

retirement-23Taking control of your financial future may seem an impossible and a hard task, but you can create a comfortable future for yourself and family. With a little help from your financial advisor and some knowledge about investments, you will be able to setup your own financial plan and ultimately prepare for a rewarding retirement.

There are different types of retirement plans available for Canadians, including individual savings, employer-sponsored and government-sponsored retirement income, and social security benefit plans. These retirement plans have their own unique advantages and disadvantages, and it’s up to you to determine which one of these retirement options fits your goal and retiring needs.

1. Canada Pension Plan (CPP)
The Canada Pension Plan is a government-sponsored program that is funded by you and your employer’s contributions. It is roughly similar to the U.S. Social Security program where the amount of benefits received is based on how much you contributed over your work lifetime. Withdrawal benefits can be taken upon retirement or disability, and are considered taxable income.

2. Tax-Free Savings Account (TFSA)
The Tax-Free Savings Account is a type of investment option available for Canadians who want to save. This is quite similar to U.S. Roth IRA whereby residents over the age of 18 can contribute to a maximum of $5,500 annually. If the maximum contribution is not reached in a given year, the unused room can be carried forward to the following year. Unlike the Canada Pension Plan, the TFSA allows the recipients to withdraw their fund at any time, tax-free.

3. Registered Retirement Savings Plan (RRSP)
The Registered Retirement Savings Plan is a type of savings and investment plan that is similar to self-managed super fund (SMSF) used in Australia and Individual Retirement Account (IRA) used in the U.S. You can contribute up to 18 percent of your income annually into your RRSP account until the age of 71. You can withdraw money from your account at any time, but withdrawals are considered as taxable income.

4. Registered Pension Plan (RPP)
The registered Pension Plan is an employer-sponsored retirement plan that is fairly similar to 401k used in the U.S. In this type of plan, you as the employee and your employer, or just your employer make contributions to your retirement account until you retire or leave the company. Contributions to RRPs are tax-deferred until withdrawn.

5. Old Age Security (OAS)
The Old Age Security is a government-sponsored program that is available for eligible Canadian citizens 65 years of age and older. It is funded out of the general revenues of the Canadian Government, which means that you do not make contributions into it directly. You get OAS pension payment just for being a senior citizen. But to receive your benefits, you must apply to the Department of Human Resources and Skills Development Canada (HRSDC) and meet their Canadian legal status and residence requirements. Benefits include Old Age Security pension, Guaranteed Income Supplement (GIS), and allowances.

Whatever type of retirement plan you choose, some basic rules should be applied: start now! Do not wait until you reach the age of 40 or 50 to begin planning. Even if you do not make enough contributions, it is still important to have an account and put some into it. Remember, even small amounts can add up over time. There’s no need for you to have the highest salary to create a financial freedom. If you do not know how to start, talk to your financial advisor and read some good books about finances.