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As the ‘baby boomers’ rapidly approach the magical age of 65, more and more questions are being asked about retirement income.  For most people their retirement income will be made up a combination of government programs and pension plans.  For those who have worked most of their lives, the income stream is made up of a combination of CPP, pension, RRSP and depending on income level from all these OAS (old age security).

For those who haven’t worked or haven’t worked much the situation is a bit different.  You may not have worked much because you have been a stay-at-home mom or situation in life has prevented you from working all of your life; regardless the reason here’s options that’s available to you.

1. CPP – As a paid into program, how much you receive will depend on how much you contributed to the program.  In most cases if you have worked a little bit you will be entitled to some CPP (Canada Pension Plan). Normally CPP sends out estimates before retirement age, so please do review their documents to ensure that they are accurate.  For those who worked but may have taken a break in working to raise your children you maybe able to have up to 7 years credited to your work time and thus increasing what your CPP payments.  See Child-Rearing Provision webpage for more details.  You will have to fill out some forms to have this added.

If you have not received any estimates as you approach 65 (actually you can do this at any time and if you are moving out of the Canada to work, I suggest you get this before you leave) you can request a copy of your contribution statement on-line, via mail.

2. OAS (Old Age Security) Pension – is a program to provide income supplement is available to anyone who has lived in Canada.  Because it is part of the general revenue, no contribution is required.  However, there’s a residency proviso.  The program is the largest pension program offered by the government and you may even be entitled to the program even if you don’t live in Canada (US residents!)  In this post will assume that you currently lives in Canada.  To qualify for the program you must be:

  • 65 and over
  • Canadian Citizen or legal resident
  • lived for more than 10 years in Canada after age of 18

You can apply after 64, but the government may auto enroll you.

How much you will receive will depend on how long you have lived in Canada.  If you have lived in Canada for 40 years after the age of 18 you will be entitled to the maximum amount as long as claw-back does not occur.  The current maximums can be found at Service Canada website.   It’ is $6618.48 per year, hardly enough to live on.

OAS Claw Back – OAS is available to everyone, but for those who have pension plans and other retirement income stream there’s a claw back clause for those who have sufficient private income stream that it is deemed that they don’t need government support.  While I have heard a lot of clients complaints about claw back from client, it is important to recognize that the claw back doesn’t happen until you have more than (in 2013) $70,954 in private retirement income.  I think what irks people is that they give it to you and then take it away.   To minimize OAS claw back, it is important to income split between spouses especially if one is receiving a good pension and one is not, but that’s another topic and post entirely.

GIS (Guaranteed Income Supplement) – Because the government recognizes  that $6618.48 isn’t enough to retire on, for those Canadians who does not have any other additional source of income, they have a separate program called GIS for those who makes less than $16, 728 (2013).  You can be entitled to this program at age 60 if your spouse is 65 and collecting OAS and GIS.  For single people the eligibility starts at age 65 when you are eligible for OAS.  You will have to apply for this program. However, once you applied, you don’t have to re-apply but will be required to file taxes every year.  This program for singles has maximum pay out of $8974.32.  The actual amount you will receive will depend on how much income from all sources you have.  Check out this webpage (scroll down half way) to get the table or download the pdf.

So the government will essentially ensure you have about $16,000 of income to live on.  While it’s better than nothing, it isn’t designed for you to live well.  If you live in a low housing cost area, this amount might be barely sufficient to offer a none destitute life.

For those of you who are in need of all of these program, I would highly recommend setting up a meeting with your local Service Canada representative who can walk you through all of the programs and help you apply for them before you turn 65 so that your entitled payments will start once you turn 65.

As always, please let me know if this post is helpful and if there’s other topics you would like to have covered.

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