With retirement a while away, you may not have spent much time thinking about where your money will come from once you stop working — but you really ought to. The earlier you start saving for retirement, the sooner you can benefit from compound interest, employer co-contributions and more, making it easier to meet your savings goals.
Pension Awareness Day is on February 15, and it's the perfect time to look at your retirement plan, take advantage of the tools at your disposal, and set yourself up for a comfy future. Plus, the Financial Services Regulatory Authority of Ontario (FSRA) can help you access the information you need to make choices that suit you when planning your future.
Ready to get into it? In Ontario, several things come together to form the picture of your expected retirement fund:
- Employer pension plans
- Personal savings or investments
- Government benefits
Employee pension plans
Employer pension plans can have a big impact on your retirement finances.
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Firstly, a job that offers a pension plan is among the most effective ways to build up your retirement savings. A workplace pension plan collects your retirement contribution before you get your paycheque, so you never miss it. Plus, if your employer offers co-contribution, you can build your funds even faster. Your dollars go much further this way, and your balance can start to grow.
If you're currently looking for a job, ask the employer about their pension plan and, if possible, prioritize a job that offers one. If you have a pension plan with your employer, get familiar with the details to understand exactly what you've signed up for and how it benefits you.
Personal savings & investments
You can take matters into your own hands too.
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Saving or investing your own money is the second way to bolster your retirement balance, and there are products to help you do this. For example, a Registered Retirement Savings Plan (RRSP) is designed to help you save for retirement and offers you a tax deduction when you contribute, and you're only taxed on withdrawals, which is usually at a lower income level when you are in retirement. Another option is a Tax-Free Savings Account (TSFA), which allows you to grow and withdraw your money tax free.
The key to achieving your financial goals is to start early. The earlier you start, the more significant the impact these benefits will have on your balance come retirement. Financial institutions like banks, trusts, insurance companies and credit unions offer RRSPs and TFSAs. The interest earned can vary, so shopping around is worth it.
Government pensions & benefits
Finally, there are government programs to help support people of retirement age. If you've contributed to the Canada Pension Plan (CPP), you can receive payments once you turn 60. At 65, you may also become eligible for Old Age Security (OAS), even if you have never worked or are still working.
Low-income seniors may also be eligible for the Ontario Guaranteed Annual Income System (GAINS) or the federal Guaranteed Income Supplement (GIS).
Planning for retirement now means you can relax about the future. New Africa | Adobe Stock
Retiring might be a few decades away, but it will be one of the most expensive things you do in your lifetime. While there's more than one way to save for retirement, they all share one thing: Getting started early can make a big difference.
Pension Awareness Day, February 15, is a perfect time to make sure your retirement plan is on course, whether that means looking into your employer retirement plan, opening a savings account or making an investment.
Taking these small steps now will put you on the path to a financially stable future, making your retirement years truly golden.
To learn more about pension plans, visit the Financial Services Regulatory Authority of Ontario's website.