How this heavyweight champion’s advice can help you with wealth planning for retirement

Where you used to receive a paycheque, you may now qualify for regular payments from the government through publicly-administered pension programs. The most important are: 

The Canada Pension Plan (CPP) — The Canada Pension Plan (CPP) is a program for Canadians (outside of Quebec) that provides monthly pension payments to qualifying individuals in retirement. The amount that you’ll be entitled to receive monthly from CPP varies depending on how much and how long you contributed, as well as the age you began taking a CPP pension.

The Quebec Pension Plan (QPP) — Quebec has its own distinct pension program called the Quebec Pension Plan (QPP). While the principle is similar to CPP in that qualifying individuals will receive monthly pension payments, the QPP maintains its own qualifying criteria, contribution rules, and benefits entitlements.

Old Age Security (OAS) — Unlike CPP and QPP, when qualifying for Old Age Security (OAS), income from employment is not a factor in determining eligibility. This pension is available for Canadians aged 65 and over who meet the criteria. 

Note that income generated from the above pension plans is taxable — for more information on taxation of retirement income, see Retiring right: Understanding the taxation of retirement income (PDF, 280 KB) Opens in a new window.. 

The Government of Canada isn’t the only provider of retirement pensions — some Canadians may qualify for employer-based private pension plans. These may include the following:

Defined-contribution plan — A defined-contribution plan allows employees to contribute pre-tax dollars. A company may opt to match a designated amount of employees’ contributions. Upon retirement, the amount of pension payments that you will receive depends on the amount of contributions, growth and investment income that accumulate in the plan up to your retirement date.

Defined-benefit plan — This program pays a pension that’s based on pre-determined factors, such as length of employment and salary history. Unlike a defined-contribution plan, the employer, not the employee, is responsible for ensuring that the contributions, income and growth are sufficient to provide employee pensions.

Similar to the government pension plans, private pension income is also fully taxable.

One of the most effective ways to increase your income in retirement is by saving funds on your own. These may include your:

RRSP (Registered Retirement Savings Plan) — Your RRSP offers a variety of options for providing you with income in retirement. By the end of the year that you reach age 71, you may choose one of 3 options. You can transfer the funds into a registered retirement income fund (RRIF), which requires you to receive a minimum amount each year using a predetermined formula based on the value of the RRIF and your age (or that of your spouse or common law partner). You may instead use the funds to purchase an annuity, which offers a guaranteed income for life or for a specified period. Alternatively, you can withdraw the funds from your RRSP as cash. Income from an RRSP, RRIF or annuity is fully taxable.

TFSA (Tax-Free Savings Account) — Your TFSA is highly flexible in that you can continue to make contributions and make withdrawals, just as you always have before retirement. When you stay within the limits, income earned in your TFSA, such as interest, dividends or capital gains, remain tax free even upon withdrawal. And, unlike an RRSP, you can re-contribute amounts withdrawn in the following year.

Non-registered accounts – Some people rely on non-registered accounts as well for personal savings, since registered accounts have contribution limits. Whether you have savings in a non-registered investment account or savings account, you can also rely on those savings to help fund your retirement.