Guide to Financial Planning for Retirement 2018-2019
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Guide to Financial Planning for Retirement 2018-2019 Edition
2
Guide to
Financial
Planning for Useful
Retirement Information
PRODUCTION HOW TO CONTACT US A GUIDE SPECIFICALLY
Question Retraite Visit our Web site: PREPARED FOR PEOPLE
questionretraite.ca AGED 45 AND UNDER
This guide provides Why do you
GRAPHIC DESIGN
Bleuoutremer
To order additional copies
of the Guide to Financial Planning information and advice have to think
for Retirement: tailored to people aged about your
PARTICIPANTS IN
THE UPDATE OF THE
> download a copy
from our Web site;
25 to 45. It provides a solid retirement
2018-2019 EDITION
Johanne Bastarache To contact Question Retraite
foundation for individuals
to plan the retirement
today?
(Retraite Québec) by mail:
they want. 1. Time plays in your favour.
Hélène Berger
QUESTION RETRAITE Throughout this guide, The sooner you start
(Institut québécois de
2600, boulevard Laurier, saving, the more time
planification financière) we stress financial planning
bureau 640
Renaud Bourget for retirement for individuals, your retirement capital
Québec (Québec) G1V 4T3
(Retraite Québec) not couples. Once you set will have to grow. In an
Mario Charron your personal objectives, RRSP or TSFA, the effect
(Fondaction) you can integrate them can be quite remarkable.
Philippe Grégoire with those of your spouse. 2. Fluctuating income can
(Chaire d’assurance et de services Spousal RRSP contributions
financiers l’Industrielle-Alliance
have a big impact on
de l’Université Laval) are an example of this. your retirement income.
Simon Houle That’s why it’s so important
(Regroupement des jeunes A GLOSSARY to protect yourself by
chambres de commerce du Québec) AT YOUR FINGERTIPS
starting to save early and
For your convenience,
Maryse Gagnon Ouellet regularly. Don’t forget!
(Retraite Québec) a glossary is provided
Sylvie McKay
at the end of the Guide.
(Question Retraite) The glossary includes
Julien Michaud definitions of various
(Autorité des marchés financiers) words and phrases used
Louis Neamtan-Lapalme in the world of finance
(Fonds de solidarité FTQ) that can seem complicated.
When in doubt, check it out!
Legal Deposit — Bibliothèque ISBN: 978-2-924692-13-4 (print) Information contained
nationale du Québec, 2018 978-2-924692-14-1 (PDF) in the 2018-2019 Guide is valid
(15th edition — 2018) as of June 2018.
Legal Deposit — Bibliothèque
nationale du Canada, 2018 © Régie des rentes du Québec, 2003
© Question Retraite, from 2005 to 2018
3
How Much
Should I
Follow
Rosaire the watering
can to discover
some tips!
Set Aside
Each Year?
A simple method with just five steps.
1 2 3 4 5
Determine the Determine Your Set Your Determine How Take
Sources of Income Retirement Age Retirement Goals Much You Should Action
You Can Rely On Save Each Year
p. 4 p. 18 p. 22 p. 26 p. 36
Useful Budget A Word About Resources Glossary
Information Table Inflation p. 43 p. 45
p. 2 p. 31 p. 40
Test Your Notes
A Word About Knowledge! p. 47
Investments p. 44
p. 41
4 / Section 1 / Determine the Sources of Income You Can Rely On
1. Determine the
Sources of Income
You Can Rely On
TO CALCULATE HOW MUCH YOU
SHOULD SAVE EACH YEAR, YOU SHOULD
START BY FINDING OUT ABOUT THE
SOURCES OF RETIREMENT INCOME
YOU COULD HAVE. WE PROPOSE
TO MAP THESE SOURCES OF INCOME
USING THE HOUSE TO THE RIGHT.
3
Private pension plans
2 and personal savings
remember
1. The first step 2. Saving for
in planning retirement is like
for retirement building a house:
is knowing your the base is provided
2
sources of income. by our governments,
but you have to
think to accumulate
personal savings to
build the walls and
the roof if you want Québec
to be safe from the Pension Plan
unforeseen.
1
Federal Old Age
Security Program (OAS)
5
1. THE FEDERAL OLD AGE
SECURITY PROGRAM (OAS)
This program provides three types of benefits: the OAS pension, You can defer the start of payment of the OAS pension for up
the Guaranteed Income Supplement (GIS) and the Allowance. to five years. The amount of your pension will increase by 0.6%
They are described below. for each month you defer payment, up to a maximum of 36%
(60 months).
1.1 THE OLD AGE SECURITY PENSION
Before you decide to defer payment of your OAS pension,
The pension is paid monthly and is indexed to the cost
be sure to consider your situation. You will not be eligible for
of living four times a year. The pension is taxable income.
the GIS and your spouse will not be entitled to the Allowance
Eligibility requirements: while you defer the start of payment of your OAS pension.
1. Be at least 2. Have a 3. Have resided
65 years old. legal status in Canada
in Canada. for at least
10 years after
the age of 18.
6 / Section 1 / Determine the Sources of Income You Can Rely On
1.2 THE GUARANTEED INCOME SUPPLEMENT 1.3 THE ALLOWANCE
You must be receiving an OAS pension to apply for the GIS. If you are married or have a de facto spouse, you can apply
It is a monthly benefit offered to individuals living in Canada for the Allowance if your spouse is receiving an OAS pension
who have a low income. The GIS is calculated based on income and your combined annual family income does not exceed a
and civil status. This tax-free benefit is indexed to the cost certain amount. The Allowance is calculated based on income
of living four times a year. and currently can be paid monthly from age 60 until your
65th birthday. This tax-free benefit is indexed to the cost
of living four times a year.
If you lived outside Canada...
If, after age 18, you have lived in Canada for more than 10 years but less than 40 years, your OAS pension will be reduced.
However, other conditions can entitle you to obtain a full pension. Find out how! For more information, see Service
Canada’s Web site at servicecanada.gc.ca.
Table 1
Type of benefit income
OLD AGE SECURITY PROGRAM (APRIL TO JUNE 2018)
Beneficiaries Maximum monthly payment* Maximum annual family income
Old Age Security Pension All beneficiaries $589.59 See note*
Guaranteed Income Supplement Single person $880.60 $17,152
Spouse of pensioner $530.12 $23,606
Spouse of non-pensioner $880.60 $42,864
Spouse of Allowance recipient $530.12 $42,864
Allowance All beneficiaries $1,119.71 $33,072
Allowance for the survivor All beneficiaries $1,334.72 $24,072
* The maximum monthly payment includes the additional enhancements to the GIS and the allowances. The amount is indexed according to inflation four times a year,
in January, April, July and October. Note: Pensioners whose net personal income is over $75,910 in 2018 must repay a portion or all of the OAS. The amount of the refund
will normally be deducted from their monthly benefits before they are paid. The full OAS pension is recovered if a pensioner’s net income is at least $123,019 in 2018.
1
2. THE QUÉBEC
PENSION PLAN
The Québec Pension Plan (QPP) provides workers and
Chart REPLACING INCOME
their families with basic financial protection in the event
of retirement, death or disability. As of January 1, 2019,
it will consist of two plans:
1. The base plan (current plan)
2. The additional plan. OTHER
OTHER
The base plan currently replaces about 25% of the income
on which you have contributed if you apply to receive
your pension at age 65.
25% 27% 31% 33.33%
The addition of an additional plan to the Québec Pension Plan
will provide more generous coverage for all current workers, OAS OAS
but it goes without saying that new contributions will have
to be deducted from your salary and paid into the new 2018 2033 2048 2065
contributions will have to be deducted from your salary
and paid into the new plan.
7
Thus, to finance the income replacement rate, which will AMOUNT OF THE RETIREMENT PENSION
gradually increase from 25% to 33.33%, there will be a 1.0% The amount of your pension will depend on the age at
long-term increase in the contribution rate of employees which you apply for it, the number of years you contributed
on the eligible salary range of $3,500 to $55,900. This new to the QPP and the employment earnings on which you
contribution will be phased in over the next five years made contributions.
2
RETIRING BEFORE AGE 65
Currently, if you retire before age 65, your pension is reduced
Chart CONTRIBUTION for each month between the date you applied for your pension
and the date of your 65th birthday. The adjustment factor varies
For the portion of the salary between depending on the amount of your pension. It will be close to 0.5%
$312
4.0%
$55,900 and $63,700
if your pension is low, and it will gradually increase to 0.6% if you
receive the maximum pension.
$524
1.0%
RETIRING AT AGE 65
0.15%
$79
For the portion of the salary between
$3,500 and $55,900 The “normal” retirement age is 65. This means that your
pension will not be reduced or increased if you start receiving
$2,830
$2,830
1.0%
5.4%
5.4%
it at age 65.
RETIRING AFTER AGE 65
1.0%
0.75%
0.15% 0.30%
0.50% If you apply for your pension after age 65, it is increased by
2019 2020 2021 2022 2023 2024 2025
0.7% for each month between the date of your 65th birthday
and the date of your retirement, up to 70 years of age.
2019 2025
BASE PLAN ADDITIONAL PLAN
In addition, for those earning more than the Maximum
Table 2 QPP RETIREMENT PENSION
You apply for your pension at… Maximum monthly pension in 2018*
Pensionable Earnings (MPE), a new 4% contribution will be
levied from 2024 on the portion that exceeds the MPE to the Age 60 $725.87
new cap of $59,800 in 2024. Starting in 2025, this new cap will
Age 65 $1,134.17
still be set equal to 114% of the MPE, or $63,700. This
additional contribution will allow to fund an income Age 70 or over $1,610.52
replacement rate of 33.33% of the MPE to the new cap.
* These amounts apply if you are receiving the maximum pension.
ELIGIBILITY REQUIREMENTS
To be eligible for a retirement pension, you must:
> be at least 60 years of age;
> have sufficiently contributed to the QPP.
Important! Very few people
receive the maximum pension
In 2017, only 3.7% of new retirees received the maximum
pension, whether a “regular” pension at age 65, an early
retirement pension between age 60 and 64, or a pension
applied for after age 65. The average pension was $503
Note that… a month for all retirees.
The amount is set based on various factors :
Contributions to the Québec 1. The age 2. The number 3. The
at which of years you employment
Pension Plan are shared you retire contributed earnings
equally between the to the Plan
employee and the employer. A retirement pension under the QPP is taxable
and indexed to the cost of living in January
Self-employed workers of each year.
assume both parts.
8 / Section 1 / Determine the Sources of Income You Can Rely On
The statement
of participation:
an effective
planning tool
If you would like to know
what the amount of your
pension will be when you
retire at age 60 or 65,
consult your Statement
of Participation. It is a good
source of information.
The statement of
participation shows all
of the employment income
on which you have made
contributions during your life
and provides an estimate
of the benefits you could
receive in retirement. You
can view it online or request
a copy by telephone.
9
To consult your statement,
use the My account
online service on
Retraite Québec’s Web site.
It’s free!
If you worked in another
Canadian province or
territory, your earnings were
recorded under the Canada
Pension Plan. These earnings
are taken into account in
the calculation of your
pension under the
Québec Pension Plan.
Are the figures for the last
few years different from
the ones you have? This may
very well be the case.
When Retraite Québec
prepared your statement,
it might not have received
the most recent data from
Revenu Québec yet.
10 / Section 1 / Determine the Sources of Income You Can Rely On
Good
to know
Applying
For Your
Québec
Pension Plan
You must apply to receive 1. Online by visiting Retraite
your pension. Québec’s Web site;
You can apply up to one year 2. B
y completing the form
in advance. You can file available on Retraite
your application: Québec’s Web site
or from Services Québec;
3. By telephone.
PHASED RETIREMENT, DISABILITY
FULL PENSION AND DEATH
If you are an employee between Retraite Québec pays benefits
55 and 70 years of age, phased in the event of disability or death.
retirement allows you to reduce For more information, consult
your hours of work and continue Retraite Québec’s Web site
to contribute to the QPP as at retraitequebec.gouv.qc.ca.
though you were earning the
same salary. The amount of
your future retirement pension
will therefore not be reduced.
However, you must reach an
IF YOU WORKED ABROAD
agreement with your employer,
known as an agreement Retraite Québec has social
concerning Québec Pension security agreements for persons
Plan contributions and working abroad in about
phased retirement. 40 countries. For more
information, consult
Retraite Québec’s Web site.11
3. PENSION PLANS OFFERED
BY EMPLOYERS
Private pension plans provide employees with a retirement
income that complements income provided by public plans.
There are various types of private plans, each with its own
characteristics. This is why it is so important to learn about
your plan before you begin your financial planning
for retirement.
FOUR TYPES OF PLANS
There are four main types of plans.
Can you recognize yours?
3.1 SUPPLEMENTAL PENSION PLAN
A supplemental pension plan (SPP), also called a “pension
fund”, is a plan into which an employer pays contributions
on behalf of employees to provide income for their retirement.
The statement
Employees can also make contributions, depending on the
terms of the plan. Amounts must be paid into a pension fund
of benefits:
that is not connected to the employer.
another effective
planning tool
There are two types of supplemental pension plans:
1. Defined benefit plan
Under such a plan, your pension is set in advance using Members of most plans receive a statement
a specific formula. It is generally a percentage of your of benefits at least once a year. This document
pensionable earnings multiplied by your years of recognized is important, so keep it in a safe place! It indicates
service. Contributions are adjusted periodically to fund the the amount of contributions you have made and
benefits promised. If your pension is harmonized with the QPP any interest accrued. If your SPP is a defined
(see the section on harmonization), it will typically decrease contribution plan, the statement will also indicate
at age 65 to take into account the QPP pension you will the amount your employer has contributed to your
receive. The pension may be indexed to compensate in whole account, with accrued interest. If your plan is a
or in part for inflation, or it may not be indexed at all. defined benefit plan, the statement will indicate
2. Defined contribution plan the amount of the pension you have accumulated.
Like the QPP Statement of Participation, the
In this type of plan, your and your employer’s contributions
statement of benefits from your SPP will allow you
are determined in advance. However, your retirement income
to calculate the income you will have in retirement
is not known in advance since it will depend on the investment
more precisely.
income accumulated in your account, the interest rate in effect
when you purchase a life annuity or the interest rates HARMONIZATION
for withdrawals from a life income fund (LIF).
A supplemental pension plan (SPP) is harmonized
A simplified pension plan (SIPP) is a defined contribution with the Québec Pension Plan when your SPP
plan administered by a financial institution that allows you, pension is reduced at age 65 because you are
as a member, to choose your investments depending receiving your pension under the QPP. For example,
on your investor profile. your statement might show that you are entitled
to an pension of $15,000 per year between ages
60 and 64 and a pension of $10,000 thereafter.
Is your plan harmonized?12 / Section 1 / Determine the Sources of Income You Can Rely On
Labour-sponsored funds and payroll
deductions are another option for pension
plans offered by employers
Subscribing for shares of a labour-sponsored investment fund (Solidarity
Fund QFL, Fondaction) can also be a worthwhile option. After reaching an
agreement with your employer, you could contribute to your RRSP through
payroll deductions and benefit from additional tax credits offered to
shareholders of labour-sponsored funds.
3.2 GROUP RRSP FINDING INFORMATION DEATH BENEFIT
A group RRSP is a collection of ON YOUR PLAN If you die before receiving a retirement
individual RRSPs to which contributions For more information, consult your pension under your SPP, your plan must
are generally made through payroll plan’s brochure or talk to your employer. pay a death benefit to your spouse,
deductions. Its purpose is to facilitate Since the income that will be provided unless he or she has waived the right to
contributions to individual RRSPs. by your plan depends on several factors it. If you do not have a spouse, or if your
Your employer may also contribute (type of plan, length of membership, spouse has renounced the death benefit,
on your behalf. contributions made, etc.), be sure you it is paid to your designated beneficiary
know all about your plan. or your heirs. This benefit is usually paid
3.3 DEFERRED PROFIT SHARING in a lump sum. Where a death benefit
PLAN (DPSP) To help you with financial planning
is payable to the spouse, it can also be
for retirement, you can also consult
Although it is not technically a pension paid in the form of a pension.
the statement sent periodically by
plan, a deferred profit-sharing plan (DPSP)
the plan administrator, the financial If you die while you are receiving a
often complements group RRSPs,
institution or your employer that gives pension under your SPP, your spouse
by receiving employer contributions.
the sums accumulated under your name. will receive a life annuity, unless he
3.4 VOLUNTARY RETIREMENT or she has waived the right to it. This
WHEN CAN YOU BEGIN annuity is usually 60% of the amount
SAVINGS PLAN
RECEIVING A RETIREMENT that you were receiving. Important!
The voluntary retirement savings plan INCOME? Be sure to check with your SPP
(VRSP) is a group plan offered by
Generally, a retirement pension under administrator to see how your plan
an employer and managed by an
an SPP begins to be paid at the normal defines “spouse,” as the definition of
authorized administrator. All employers
retirement age set by the plan (usually spouse varies from one law to another.
that do not already offer a retirement
age 65). However, a pension can be paid
plan for which source deductions can TRANSFER RIGHT
earlier (often as of age 55) or later
be made and that have at least five
if the plan allows. The amount will You can generally transfer pension
employees will be obligated to offer
then be adjusted accordingly. If you benefits accumulated in an SPP to:
a VRSP to their employees. Employees
have a defined benefit plan, the amount > a locked-in retirement account (LIRA);
will be able to opt out of a VRSP if they
of your pension and the date you begin
wish to do so. For more information > a life income fund (LIF);
receiving it will generally depend
about VRSPs, consult Retraite Québec’s
on your age and the number of years
Web site. > your new employer’s SPP if transfers
of service recognized for the purposes
are accepted;
of the pension plan. Some plans require
you to have reached a certain age > a life annuity contract from an insurer.
(e.g., 55 or 60) or to have achieved
a minimum number of years of service PHASED RETIREMENT
(e.g., 35 years of service). For other plans, You could be eligible for phased
the sum of your age and years of service retirement if you are a member of
combined must reach a certain number an SPP and your plan provides for it.
(e.g., 88 or 90). Phased retirement could allow you to
receive your pension while working part
time. Ask your employer about it!13
Table 3 GENERAL FEATURES OF THE FOUR TYPES OF PRIVATE PENSION PLANS
Supplemental pension plans
Defined contribution Group RRSP DPSP VRSP
Defined benefit plan
plan
Amount of the Yes No No No No
pension known
in advance
Basic employer > Employer pays the > Minimum 1% of total > No (discretionary > Varies according > Employers are
contribution sums necessary to fund payroll contribution) to the plan not obligated to
the benefits promised > Standardized for > Can be locked-in > Not locked-in contribute, but if they
> Locked-in everyone (depending > Seizable or unseizable, > Seizable or unseizable, do, their contributions
> Unseizable on employment depending on depending on are locked-in
category or other the context the context
recognized criteria)
> Locked-in
> Unseizable
Basic member > Compulsory or non- > Compulsory or non- > Generally N/A > Automatic and
contribution compulsory, at the compulsory, at the non-compulsory voluntary (possibility
(employee employer’s discretion employer’s discretion > Not locked-in of waiving
contribution) > Locked-in > Locked-in > Seizable or unseizable, participation)
> Unseizable (SIPP: locked-in or not, depending on > Not locked-in
at the employer’s the context > Unseizable
discretion)
> Unseizable
Voluntary > Not locked-in > Not locked-in > Not locked-in N/A > Yes, under certain
contributions > Unseizable > Unseizable > Seizable or unseizable, conditions (RRSP
when allowed depending on contribution room)
the context
Withdrawal/ > Not allowed, unless > Not allowed, unless > Yes, except if special > Yes, if plan allows > Yes, at all times
transfer by member it is a voluntary it is a voluntary agreement with
during employment contribution and the contribution and the employer
plan allows it plan allows it
SIPP:
> Locked-in portion:
no refund; transfer
allowed as of age 55
> Portion not locked-in:
• Employee
contribution: at the
employer’s discretion
• Voluntary
contribution: yes
Administration > Pension committee > Pension committee > Employer, union or > Employer via a trust > Administrator
(or employer if fewer (or employer if fewer professional authorized by the
than 26 members than 26 members association Autorité des marchés
and beneficiaries) and beneficiaries) financiers
SIPP:
> Financial institution
Your options when Portion not locked-in: Portion not locked-in: > RRSP, RRIF > RRSP, RRIF Portion not locked-in:
membership ends > RRSP, RRIF > RRSP, RRIF > Annuity > Cash refund (taxable) > RRSP, RRIF
> Annuity > Annuity > Cash refund (taxable) > Payments over > Annuity
> Cash refund (taxable) > Cash refund (taxable) > Other registered plan ten years or single > Cash refund (taxable)
> Other pension plan > Other pension plan lump-sum payment > Other locked-in plan
> Other registered plan
Locked-in portion: Locked-in portion: N/A N/A Locked-in portion:
Before age 55: > LIRA, LIF As of age 55 (except in
> LIRA, LIF > Life annuity the case of a disability
> Life annuity > Other pension plan that reduces life
expectancy): payment
> Other pension plan Possible refund in
As of age 55: certain situations
> Life annuity
Possible refund in
certain situations14 / Section 1 / Determine the Sources of Income You Can Rely On
> You have the possibility of converting it
into an annuity or registered retirement
Save first, income fund (RRIF).
Tip spend later. > You have the possibility of drafting
strategies to split income at retirement
through a spousal RRSP. Before
We often hear that it is hard to put money aside. Make contributing, consult a specialist to
saving a priority. It is a good way to maintain the standard find out the consequences in case of
of living you want in retirement. separation if you are de facto spouses.
If you start saving early, you won’t have to ramp up your * Under certain conditions, you can participate
in the HBP even if you already owned a home
efforts right before you retire. a few years earlier.
That’s why we suggest you use a method that allows to
have savings deducted directly at source. The process is 2. TFSA
painless because money is set aside before you can get Available since January 1, 2009, the tax-free savings account
your hands on it. (TFSA) is becoming one of the most useful tools for building
up savings for retirement. The types of investment available
for TFSAs are generally similar to those available for RRSPs.
The TFSA is a savings account into which adults can deposit
4 YOUR PERSONAL SAVINGS amounts that will remain sheltered from taxes. It can be
used to save money for any reason (the purchase of a
You can build your personal savings in two savings vehicles: home, a car, etc.).
registered investments and unregistered investments.
Anyone 18 or over can contribute to a TFSA, which has no
4.1 REGISTERED INVESTMENTS maximum age and no income requirements. Unused TFSA
1. RRSP contribution room accumulates and can be carried forward.
Savings invested in a registered retirement savings plan (RRSP) The TFSA contribution limits were:
are sheltered from taxes as they grow. That’s why RRSPs are
said to offer tax advantages that encourage investment
for retirement purposes. An RRSP can include several types 2009 to 2012: 2013 to 2014: in 2015: 2016 to 2018:
of investments: stock shares, bonds, guaranteed investment $5,000 $5,500 $10,000 $5,500
certificates, etc. Amounts invested in an RRSP are deducted
from your net income, which lowers your taxes for the year
during which you invested. However, once you withdraw from In 2018, the cumulative maximum is $57,500 for a person
an RRSP, the amounts are taxable income. Therefore, RRSPs who was 18 in 2009.
allow you to postpone payment of your taxes to a later date, No amount (capital or interest) withdrawn from a TFSA
when your tax rate should be lower. is taxable, and the amounts withdrawn free up more
The maximum contribution to an RRSP is 18% of earned contribution room for future years. TFSA contributions
income, up to $26,230 in 2018 and $26,500 in 2019 (less if you are not tax deductible.
contributed to an SPP or VRSP). To find out how much you can When it comes to taxes, the advantages of using a TFSA
contribute to your RRSP, consult the Notice of Assessment for your retirement savings are undeniable: since withdrawals
that you receive annually from the Canada Revenue Agency. are tax free, they do not negatively affect the various
calculations for amounts received from social programs
An RRSP offers a number of advantages:
(for example, the Guaranteed Income Supplement, the
> You have the possibility of using funds in an RRSP to finance Old Age Security pension or employment insurance). Also,
the purchase of your first home through Home Buyers’ Plan the amounts accumulated in a TFSA before retirement can
(HBP)* or further your education through the Lifelong be used in an emergency, and any withdrawals create new
Learning Plan (LLP), under certain conditions. For more TFSA contribution room as of the following year.
information about the HBP and its effects on your retirement,
consult the guide Are you a first-home buyer? Benefit from
the HBP while staying on course for retirement!, available
on Question Retraite’s Web site.15
Tableau 4 COMPARISON OF RRSPS AND TFSAS
RRSP TFSA
Annual contribution deadline 60 days after the end of the current taxation year, December 31 of the taxation year.
DATES AND AMOUNTS
either February 29 or March 1, depending on the case*.
PERMITTED
Annual contribution limit 18% of income earned the preceding year, In 2018, maximum of $5,500 per year as of age 18.
up to $26,230 in 2018 and $26,500 in 2019 , The cumulative maximum is $57,500 for those
indexed to the cost of living for subsequent years. not having reached the annual maximum since
Participation in employer-sponsored retirement the program was established in 2009.
plans reduces the annual contribution amount.
Age limit December 31 of the year you reach age 71 None
Are contributions income Yes No
tax deductible?
Taxable withdrawals? Yes No
TAXES
Taxable investment income? No No
In case of death Amounts transferred to a spouse or a disabled child Amounts withdrawn from the account at death
are not taxable. Possible tax relief for amounts are not taxable. They do not affect the contribution
transferred to children. room of the spouse who transfers these amounts
into their own TFSA.
Contribution room available Corresponds to the unused portion of your maximum Corresponds to the unused portion of your maximum
annual amount deductible since 1991. annual allowable contributions since 2009.
CONTRIBUTION ROOM
Excess contributions Penalty of 1% per month Penalty of 1% per month
(lifetime excess contributions of $2,000 allowed)
Do withdrawals increase No Yes. Withdrawals add to the contribution room
contribution room? for the following year**.
Spousal contributions Possible. The contributing spouse claims the tax Considered a deposit by the spouse themselves.
deduction even if he or she is not the beneficiary. The surviving spouse may only transfer the deceased
spouse’s sums to his or her account upon death,
without any impact on his or her contribution room.
Can it be used as collateral No Yes
CONSIDERATIONS
for a loan?
OTHER
Impact of withdrawals on Withdrawals are added to taxable income None
benefits from social programs
* For example, on March 1, 2018 to reduce your taxable income for 2017. ** Withdrawals from a TFSA account in a year do not reduce the total amount of contributions already
made in that year. However, they are added to the cumulative maximum from the following year, i.e. that they increase the contribution room for the following year. Please
refer to the Government of Canada site for more details.
Avoid You may be
tempted to dip
> Any funds you withdraw today will
deprive you of much larger sums
> Amounts withdrawn from an RRSP
do not free up contribution room
dipping into your RRSP that would otherwise be available for subsequent years: your used
into your before
retirement.
in retirement. For example, at an
average annual rate of return of 5%,
contribution room is gone for good.
RRSP To help you a withdrawal of $5,000 made
> Any money withdrawn from
your RRSP is deemed to be taxable
before resist that
temptation,
today will deprive you of $21,610 income. The cost could be high.
in 30 years. Think it through!
retirement consider the
For example, at a 40% tax rate,
a withdrawal of $5,000 will cost
(Except when taking following:
advantage of the HBP you $2,000 in taxes.
or the LLP)16 / Section 1 / Determine the Sources of Income You Can Rely On
Choose Chart 3 MONTHLY SAVINGS
Periodic Savings of $100 a month until age 60
Annual rate Annual rate Annual rate
Contributions of return: 3% of return: 5% of return: 7%
$180,000
It is generally better to contribute a little each month $160,000
to your RRSP or TFSA rather than make one large contribution
$140,000
at the end of the year. Why? Because each month, interest
accrues tax free on every dollar invested. $120,000
$100,000
$80,000
$60,000
$40,000
$20,000
Age Limit for
$0
If you begin at: Age 25 Age 35 Age 45
RRSP Contributions As you can see, by saving a little each month, you accumulate
You can contribute to an RRSP until December 31 of
st money easier without undue pressure on your budget. If you
the year in which you reach age 71. Three options are then are disciplined, you can save money from each pay cheque
available: withdraw the entire amount of your RRSP (rarely and accumulate even more.
to your advantage), purchase an annuity or convert your The following chart shows the growth of investments in two
RRSP into a registered retirement income fund (RRIF). interest-bearing vehicles, one registered, the other not.
You can also combine these strategies. An RRIF is similar We took into account both the tax reduction obtained (40%)
to an RRSP in that it allows your savings to grow tax free. by contributing to the RRSP and the income taxes payable
The main difference is that you must withdraw a minimum (40%) by withdrawing the amounts from the RRSP.
4
amount from your RRIF every year, which is then
considered taxable income.
HE REGISTERED SAVINGS
T
Even if you can no longer contribute to your RRSP, if your Chart ADVANTAGE*
spouse has not yet reached age 71, you can continue to
5 years 10 years 15 years 20 years 25 years 30 years 35 years
contribute to a spousal RRSP with all the tax advantages.
You must have RRSP contribution room, and the tax refund
$120,000
will go to you. Your spouse’s RRSP contribution room
will not be affected. From a legal standpoint, however, $100,000
the amounts contributed belong to your spouse.
This may have consequences in the event of the $80,000
breakdown of the couple’s union if the couple is not
$60,000
subject to the rules of partition of family patrimony.
$40,000
There is no maximum age limit for contributing to a TFSA.
$20,000
$0
Investments outside a RRSP/TFSA Investments in a RRSP/TFSA
* Growth of an annual contribution of $1,000 in an RRSP or TFSA and in an unregistered
savings vehicle. The assumptions are as follows: annual rate of return of 5%, marginal
tax rate of 40%, payments made at the beginning of the year.17
4.2 UNREGISTERED INVESTMENTS In your RRSP or TFSA, investments such as publicly-traded
1. Traditional unregistered investments shares or certain mutual fund shares generate dividend income
or capital gains. You therefore lose the tax break you would
If you have maximized your RRSP, TFSA and SPP or VRSP
be eligible for otherwise. A financial planner can help you draft
contributions, there is no reason you cannot save more
an investment strategy that weighs these factors.
for retirement by making unregistered investments outside
an RRSP or TFSA. However, income generated by unregistered 2. Unregistered tax-advantaged fund
investments is taxable. One common strategy is to: In addition to traditional unregistered investments,
> put all interest-bearing investments into an RRSP or TFSA. you can invest in unregistered tax-advantaged funds.
Although tax-advantaged funds are less flexible than other
> put all investments that pay capital gains into an
types of funds in terms of cashing out, they allow you in return
unregistered account.
to benefit from tax credits that reduce your income taxes
For tax purposes, interest income is not treated the same payable. As with other unregistered investments, the income
as dividends or capital gains. Therefore, the taxes payable these investments generate (capital gains, in the case of
on interest earnings are greater than the taxes that apply tax-advantaged funds) are taxable in the year of withdrawal.1
to dividend and capital gains income.
Here is a table summarizing the main characteristics of three
tax-advantaged funds in Quebec:
Table 5 MAIN CHARACTERISTICS OF THREE TAX-ADVANTAGED FUNDS IN QUEBEC
Fondaction Solidarity Fund QFL
Capital régional
et coopératif Desjardins2
Federal credit rate 15% 15% N/A
Provincial credit rate 20% 15% 35%
Total credits 35% 30% 35%
Maximum annual amount
Maximum of $5,000 in total for both funds Maximum of $3,000
eligible for tax credits
Can be deposited
Yes Yes No
in an RRSP
Minimum holding period of 7 years,
Withdrawal conditions3 At retirement, with exceptions
with exceptions
Plan online!
SimulR and CompuPension are two tools that enable you to simulate your retirement income. Visit their site
to use them and kill two birds with one stone by consulting My Account. There you will find information on your participation
in the Québec Pension Plan as well as the amounts you could receive when you retire. retraitequebec.gouv.qc.ca
1. The tax credits of these funds do not reduce the adjusted cost base of these shares, which will be a significant benefit on the resale of these shares by decreasing the capital gain.
/ 2. This is the current category of shares. Beginning in 2018, a shareholder with shares of the current category for at least 7 years and who has never requested
the redemption of his or her shares or proceeded to the purchase by agreement of his or her shares, may acquire shares of a new category. This new class of shares will entitle
the shareholder to an additional 10% credit. In exchange for this credit, the shareholder agrees to keep his or her shares for another period of 7 years. The maximum amount
eligible for the credit will be $15,000, which could generate an additional credit of up to $1,500. / 3. Consult the simplified prospectus for these funds for more information.18 / Section 2 / Determine Your Retirement Age
2. Determine
Your Retirement
Age
IF YOU CHOOSE TO RETIRE
BETWEEN THE AGES OF 55 AND 65,
THERE MAY BE A FINANCIAL COST.
AT AGE 55, you are not yet eligible fo r a public pension plan
(Québec Pension Plan and Old Age Security). You will have to rely on 5
your personal savings to get by. Will you have enough? Remember,
you won’t be entitled to a pension under the Québec Pension Plan
(QPP) for another five years, and it will be a reduced pension at that. remember
You’ll also have to wait at least ten years to qualify for an Old Age
Security (OAS) pension. 1. Eligibility for a 4. Review your saving
public pension strategies regularly
AT AGE 60, you become eligible for a retirement pension under the
begins only to ensure a
QPP. If you apply for a QPP pension at that age, the amount will be
at age 60. retirement that
lower than the amount you would have been entitled to if you had
2. Public pension meets your
applied at age 65. The decrease is permanent.
plans are designed expectations.
AT AGE 65, you have access to all of the available sources to ensure minimum 5. The age at which
of retirement income. You can receive an OAS pension and protection in you decide to retire
the Guaranteed Income Supplement (GIS), if you are eligible. retirement. will influence your
3. Retirement income savings strategy.
generally depends
on employment
earnings.19
Table 6 SINGLE PERSON RETIRING AT AGE 60 IN 2018 AND 2048
QPP* OAS GIS Annual total
% of income replaced
Annual income* before taxes
before retirement
2018 2048 2018 2048 2018 2048 2018 2048 2018 2048
$30,000 $4,878 $5,963 $0 $0 $0 $0 $4,878 $5,963 16% 20%
$35,000 $5,645 $6,900 $0 $0 $0 $0 $5,645 $6,900 16% 20%
$40,000 $6,399 $7,822 $0 $0 $0 $0 $6,399 $7,822 16% 20%
$45,000 $7,140 $8,728 $0 $0 $0 $0 $7,140 $8,728 16% 19%
$50,000 $7,868 $9,618 $0 $0 $0 $0 $7,868 $9,618 16% 19%
$55,000 $8,583 $10,492 $0 $0 $0 $0 $8,583 $10,492 16% 19%
$60,000 $8,710 $11,158 $0 $0 $0 $0 $8,710 $11,158 15% 19%
$65,000 $8,710 $11,600 $0 $0 $0 $0 $8,710 $11,600 13% 18%
$70,000 $8,710 $11,600 $0 $0 $0 $0 $8,710 $11,600 12% 17%
$75,000 $8,710 $11,600 $0 $0 $0 $0 $8,710 $11,600 12% 15%
$80,000 $8,710 $11,600 $0 $0 $0 $0 $8,710 $11,600 11% 14%
* This data is in 2018 dollars20 / Section 2 / Determine Your Retirement Age
Table 7 SINGLE PERSON RETIRING AT AGE 65 IN 2018 AND 2048
Income from public sources
Income from
Total income
private sources
Annual Total income,
Additional
income* Total Income public and Objective of
Replacement income
before QPP* OAS* GIS* from public private sources replacement
rate to achieve
retirement sources combined, by rate
the goal
objective
2018 2048 2018 2048 2018 2048 2018 2048 2018 2048 2018 2048 2018 2048 2018 2048
$30,000 $7,304 $8,929 $7,075 $5,249 $1,065 $0 $15,445 $14,178 51% 47% $8,500 $9,700 $23,945 $23,878 80% 80%
$35,000 $8,521 $10,417 $7,075 $5,249 $0 $0 $15,597 $15,666 45% 45% $12,500 $12,500 $28,097 $28,166 80% 80%
$40,000 $9,739 $11,905 $7,075 $5,249 $0 $0 $16,814 $17,154 42% 43% $13,000 $13,000 $29,814 $30,154 75% 75%
$45,000 $10,956 $13,393 $7,075 $5,249 $0 $0 $18,031 $18,642 40% 41% $15,500 $15,000 $33,531 $33,642 75% 75%
$50,000 $12,174 $14,881 $7,075 $5,249 $0 $0 $19,249 $20,130 38% 40% $16,000 $14,800 $35,249 $34,930 70% 70%
$55,000 $13,391 $16,369 $7,075 $5,249 $0 $0 $20,466 $21,618 37% 39% $18,000 $16,800 $38,466 $38,418 70% 70%
$60,000 $13,610 $17,434 $7,075 $5,249 $0 $0 $20,685 $22,683 34% 38% $21,200 $19,500 $41,885 $42,183 70% 70%
$65,000 $13,610 $18,124 $7,075 $5,249 $0 $0 $20,685 $23,374 32% 36% $21,500 $19,200 $42,185 $42,574 65% 65%
$70,000 $13,610 $18,124 $7,075 $5,249 $0 $0 $20,685 $23,374 30% 33% $24,500 $22,000 $45,185 $45,374 65% 65%
$75,000 $13,610 $18,124 $7,075 $5,249 $0 $0 $20,685 $23,374 28% 31% $24,500 $22,000 $45,185 $45,374 60% 60%
$80,000 $13,610 $18,124 $7,075 $5,249 $0 $0 $20,685 $23,374 26% 29% $27,000 $25,000 $47,685 $48,374 60% 60%
*This data is in 2018 dollars. The Old Age Security pension and the Guaranteed Income Supplement increase each year according to inflation, while salaries generally increase
at a rate of 1% higher than inflation. To reflect this assumption, we need to multiply OAS in today’s dollars by a discount factor of 1% by 2018 (7,075.08 × 0.7419 = $5,249).
WHAT DO PUBLIC PENSION Here is an example She could also consider saving money
PLANS OFFER? Maryse is 35 years old. She believes to fill this gap. As our example applies
Public programs such as the Québec that her average gross annual income to pre-tax income we however do not
Pension Plan (QPP), federal Old Age of the three years before her withdrawal take into account this possibility.
Security (OAS) pension and Guaranteed from labour market will be $50,000
However, if she retires at age 60
Income Supplement (GIS), generally do and, at present, she has not saved
not provide all of the funds necessary for retirement. > Public plans will only replace 19%
to cover individual’s needs in retirement. of her working income (see Table 6).
At age 65, public plans replace about
You will have to rely on your personal > She will only receive 64% of her
40% of her working income
savings or income from a pension plan pension under the Québec Pension
(see Table 7). To achieve her goal of
to make up the difference. Plan for the rest of her life.
70% replacement rate of her income
at retirement, she will need additional > She will not yet be eligible for
income from another pension plan, the OAS or GIS.
an RRSP or a job to make up the
difference, of $14,800 a year.21
Setting your retirement age
is a good starting point,
but life can sometimes
throw you a curve.
Here are three examples:
YOUR FAMILY YOUR PROFESSIONAL
HEALTH OBLIGATIONS SITUATION
Your health can change drastically, If you’re thinking about having children It is difficult to predict what your
forcing you opt for phased retirement at age 35, bear in mind that they will only professional situation will be like over
or retire earlier than you intended. be 20 years old when you turn 55. If they a period of 20 or 30 years. Losing a job,
A serious illness or disability could are students or still living at home, this a plant closing, returning to school
lead you to reassess your plans for could mean an extra financial burden. to begin a new career, a work accident,
retirement. A financial planner can You may have to put off retirement. and starting a new business are a few
give you more information to help On the other hand, if you have to care examples of major changes that could
you prepare for the unexpected. for a family member, you may be forced have an effect on when you retire.
to leave the labour market sooner Your retirement could be delayed or,
than expected. Be sure to take family on the contrary, occur sooner than you
obligations into consideration when anticipated. A professional can help
planning for retirement. take these various factors into account
in planning for retirement.
Other
information
LIFE EXPECTANCY AND the birth of a child, a sabbatical leave, More women live alone. In 2011,
FINANCIAL PLANNING part-time work, loss of employment or in Quebec, 39% of women aged 65
Life expectancy is the average number startup of a business. and over lived alone, compared with
of years you can expect to live. But 20% of men the same age.4 Therefore,
IT’S DIFFERENT FOR WOMEN more women do not have help covering
it is only an average: some people die
very young while others live beyond Studies show that women have basic needs such as lodgings, heating,
age 100. So you need to plan for less retirement income than men. taxes, etc.
retirement carefully! When a child is born, women often take
maternity leave and have their income
REGULAR UPDATES drop for an extended length of time.
A financial plan for retirement is never During this period, they do not
set in stone. Professionals recommend necessarily save for retirement.
that you re-evaluate your plan every If you are a woman, you will probably
three years or when a major change have to live longer on your savings
that has an effect on your finances than if you were a man. In 2017, life
occurs. Therefore, you could re-evaluate expectancy for men and women age 65
it at different phases of your life, such as is 85 and 88 years of age respectively.
4. Source: Ministère de la Santé et des Services sociaux.22 / Section 3 / Set Your Retirement Goals
3. Set Your
Retirement
Goals
GENERALLY, YOU WILL NOT NEED
SPECIALISTS AGREE THAT IN GENERAL, AN INDIVIDUAL WILL 100% OF YOUR INCOME ONCE
REQUIRE APPROXIMATELY 60% TO 80% OF HIS OR HER GROSS YOU RETIRE BECAUSE:
ANNUAL INCOME EARNED DURING THE LAST THREE YEARS > you will have > you will no
OF WORK TO MAINTAIN THE SAME STANDARD OF LIVING IN fewer expenses, longer be making
RETIREMENT. FOR EXAMPLE, IF YOUR AVERAGE GROSS ANNUAL and some will or contributions for
INCOME IS $50,000, YOU WILL NEED $30,000 TO $40,000
disappear retirement;
PER YEAR IN RETIREMENT.
altogether (e.g.,
> you will likely
work-related
have fewer
expenses);
family-related
> you will be expenses.
However, this “rule” does not apply to everyone: it depends paying less tax;
on your employment income and your post retirement plans. On the other hand, costs for health care
You can determine a higher or lower percentage, based on your and social and recreational activities
personal situation, that takes into account your salary and your could increase.
retirement goals.
You can convert the percentage into dollars (e.g., 80% of $30,000
is $24,000) to determine whether the amount will be sufficient.
Get inspired by
the content of
fixed and variables
expenses from
the budget table
in this guide to
help you evaluate
your expenses
in retirement.23
60 to 80%
of average
work income earned
during the last
three years
3
remember
1. An individual will generally require 60% 3. At whatever age you retire, public
to 80% of his or her average gross plans will only replace a portion
annual income earned during the last of your income. You can make up
three years of work to maintain the the difference with your personal
same standard of living in retirement. savings or retirement plan—or a
2. When you retire, your work-related combination of the two.
expenses will decrease or disappear,
but expenses for health care and social
and recreational activities will increase.24 / Section 3 / Set Your Retirement Goals
Table 8 PROBABLE CHANGES IN EXPENSES DURING RETIREMENT
Expenses Eliminated Reduced Unchanged Increased
Social and recreational activities
Food
Contributions to a pension plan offered by your employer
RRSP contributions
TFSA contributions
Québec Pension Plan contributions
Professional membership fees and union dues
Employment insurance contributions
Parental insurance contributions
Vehicle maintenance
Transportation expenses
Expenses for travel
Income tax
Lodging
Health care
Clothing25
What does
this chart mean?
Chart 5 shows the percentage
of income various public sources
replaces, by employment income
prior to retirement, when benefits
start at age 65. The higher your salary,
the more you will need to rely on other
types of savings to maintain the standard
of living you had prior to retirement.
Chart 5 S OURCES OF INCOME REQUIRED TO REPLACE BETWEEN 60% AND 80% OF YOUR SALARY BEFORE
RETIREMENT FOR A SINGLE PERSON RETIRING AT AGE 65 IN 2048
80% objective 75% objective 70% objective 65% objective 60% objective
90%
80%
33% 35%
SOURCES OF REPLACEMENT INCOME (%)
32% 33%
70%
30% 31% 33%
30% 31%
60%
29% 31%
50%
17%
15%
40% 13% 12%
10% 10%
9%
8%
30% 7%
30% 30% 30% 30% 30% 30% 7% 7%
29% 28%
26%
20% 24% 23%
10%
0%
$30,000 $35,000 $40,000 $45,000 $50,000 $55,000 $60,000 $65,000 $70,000 $75,000 $80,000
REVENUE BEFORE RETIREMENT ($)
QPP OAS Additional income to achieve the goal26 / Section 4 / Determine How Much You Should Save Each Year
4. Determine
How Much You
Should Save
Each Year
4
HAVE YOU STARTED TO MAKE CALCULATIONS remember
FOR RETIREMENT? FROM A FINANCIAL STANDPOINT,
AT WHAT AGE COULD YOU RETIRE?
1. Make your budget
to know where your
money goes.
2. Pay yourself first.
Of the amount you could manage to save each month, what portion 3. Set aside 10%
should go towards an RRSP? Should you invest in a TFSA? How much of your net income
will your RRSP be worth when you are 60? If you retire early, do you for retirement.
know how much your SPP pension will provide? In this section, 4. Re-evaluate your
discover the various tools offered by Question Retraite to help budget regularly.
you answer these questions.
1. PUT AT LEAST 10% FOR EXAMPLE Audrey likes her current lifestyle and
OF YOUR NET Audrey is 28 years old. She is an wants to maintain it. Given this fact,
employee at a multimedia development where do we find amounts to save?
INCOME AWAY
company, and her employer does 10% of her net income is $3,600.
FOR RETIREMENT not offer a retirement savings plan. She would like to save that amount each
To make sure you save, it is better Her annual gross salary is $45,000. year. In making her budget, she realizes
to start with a budget and include Currently, once the typical deductions that she has a $3,000 balance on her
a portion devoted to savings. are made (federal and Québec taxes, credit card at an interest rate of 18%.
contributions to the Québec Pension She also has a credit card balance
As a general rule, it is often
Plan, employment insurance and the insurance that costs her $360 a year.
recommended to set aside 10% of your
Québec Parental Insurance Plan, etc.), She finds that her auto and home
net income for retirement. Of course,
her net income of approximately insurance are expensive and that her
this rule doesn’t apply in all situations,
$36,000 is used for all of her basic groceries are too. She is, however,
but it can give you a general estimate
expenses, plus a few “treats.” very proud of her $3,000 cash
of the amount you should save in order
to maintain your standard of living emergency fund deposited in a TFSA.
in retirement.27
By taking inspiration from the 99 trucs pour économiser sans trop se priver, she chooses a few
tips and she quickly gets results while maintaining her standard of living:
Table
Actions
9 AUDREY’S STRATEGY TO ACHIEVE HER GOALS
Results
ACHIEVE IMMEDIATELY
She uses her emergency fund (TFSA) to pay off her She saves $540 in interest and $360 in credit card
expensive credit card. From now on, she will pay the insurance each year. She temporarily sacrifices
full credit card balance at the end of each month. $45 of annual return on the amounts deposited
in her TFSA.
She changes credit cards for a card that gives her She will receive $200 in rewards each year and
cash rewards. she will invest it.
She’s shopping for auto and home insurance. She saves $400 a year.
She buys more foods on sale at the grocery store, She saves $300 a year.
going so far as to stock up in order to not pay
for regular-priced food.
She uses part of her 3% salary increase ($400 a year) She saves $400 the first year, $800 the second
to invest. The rest will be used to offset inflation. and $1200 the third year.
She will do the same for the next two years, then
she will use all of her other salary increases to
improve her lifestyle. After all, she tells herself,
one must live well!
ACHIEVED IN 1ST YEAR
After 9 months, she saved $1,500 and deposited She saves $200 a year in bank fees.
it into her savings account as an emergency fund.
She then chooses a banking package allowing her
a dozen free transactions per month while
maintaining this balance. Most of her transactions
will now be done with her credit card which does
not charge fees.
At the end of the first year, with the money saved, She deposits $700 into her TFSA that accumulates
she deposits $700 in her TFSA. tax-free and also serves as an emergency fund.
ACHIEVED IN 2ND YEAR
The amount saved that year allow her to: > She deposits $800 more into her TFSA.
> deposit $800 in her TFSA for her emergency fund; Her emergency fund is totally restored.
> invest $1,570 in her RRSP (cost of $1,060 > She contributes $1,570 to her RRSP.
considering the tax reduction); > She contributes $2,400 to a labour-sponsored
> invest $2,400 in a labour-sponsored RRSP fund RRSP fund.
(cost of $900).
ACHIEVED IN 3RD, 4TH AND 5TH YEARS
The amount saved in each of these years > She contributes $3,348 to her RRSP.
allow her to: > She contributes $2,400 to a labour-sponsored
> invest $3,348 in her RRSP (cost of $2,260 RRSP fund.
considering the tax reduction);
> invest $2,400 in a labour-sponsored RRSP fund
(cost of $900).
After five years, Audrey sees the significant financial progress she has made and she is proud of it.
Taking into account her performance, she has accumulated more than $22,000 in her RRSPs.28 / Section 4 / Determine How Much You Should Save Each Year
She is aware that she will have to pay 2. PLAN This calculator is for everyone,
taxes when she withdraws some money, NOW! no matter how familiar you are
but the amount accumulated without with personal finances and financial
reducing her standard of living is The 10% rule doesn’t apply to every planning. It offers an overview of
still impressive. situation. Your personal retirement goals the amounts you could receive in
might require you to set aside a different retirement. It estimates the amounts
She could have chosen to invest less in percentage of your income. If your you could receive from your RRSPs,
a labour-sponsored fund or in her other employer offers a retirement savings QPP pension and OAS pension,
RRSP, and more in her TFSA, but she plan, you could reduce the amount as well as any other applicable
thought it was motivating to see large of your personal savings. employer-sponsored retirement plans.
amounts of money accumulate through
tax breaks. For the following years, she Question Retraite invites you to use SimulR can also help you determine
proposes to consult an authorized SimulR! Simple and easy-to-use, the tool if the money you are setting aside for
representative to make sure to diversify was designed to help you make your retirement will be enough to meet your
her investments. own savings plan for retirement. needs throughout your retirement.
It is available on Question Retraite’s If not, it will give you an overview
Web site questionretraite.ca in the of the additional amounts that you
How much “Outils pratiques” section as well
as on the Retraite Québec Web site
will need to save each year to meet
your goals.
will Audrey at retraitequebec.gouv.qc.ca.
have
accumulated
in 35 years.
Assuming a rate of return of 3.9%,
To Help You
she will have accumulated more than
$310,000. That’s a nice chunk of change
Save
for her retirement!
Question Retraite’s brochure 99 trucs pour épargner sans trop
se priver (French only) is a tool that will help you save money
by paying less for the goods and services you need without
asking you to give up coffee or take your lunch to work.
Download this guide for free at questionretraite.ca.29
USING THE RETIREMENT SAVINGS CALCULATOR
Xavier, age 35, dreams of retiring at age 60 to devote Results: if he retires at age 60, he will have to save $11,500
more time to his hobby, sailing. He does not contribute to a a year; if he retires at age 65, he will only have to save
retirement savings plan offered by his employer. If he retires approximately $5,000 a year to meet his goals. If Xavier
at age 60, he knows that in order to get by, he can only rely wants to fulfil his dream and retire at age 60, he will have
on his pension under the Québec Pension Plan and his RRSP, to limit his expenses and set specific savings goals.
which is worth $20,000 today. Later on, at age 65, he will be
entitled to an OAS pension. He decides to use the SimulR
calculator to determine his estimated needs in retirement,
his future shortfall and the savings he will need to offset
this shortfall.
Chart 6 AMOUNT XAVIER SHOULD SAVE ANNUALLY
Xavier will have to save $11,500 a year Xavier will have to save $5,000 a year
if he wants to receive $35,000 at age 60 if he wants to receive $35,000 at age 65
Replacement rate Replacement rate
of gross working income by age of gross working income by age
100% 100%
80% Goal 80% Goal
60% 60%
40% 40%
20% 20%
0% 0%
As of age 60 As of age 65 As of age 65
Accumulated amount QPP OAS
3. YOU CAN LEARN Let’s take another look at the example of Xavier. He has a
TO MAKE A BUDGET general idea of where his money is going. He knows how
much he spends on rent, electricity, heating, loans, etc. Why?
Now that you have calculated how much you will need Because they represent a large outflow of cash. He isn’t
to save each year, you would probably appreciate some as sure, however, when it comes to variable expenses such
help achieving your savings goals. The first step is to as food, clothing and leisure activities. He needs to be
prepare a budget that includes savings. thorough when it comes to making a budget. Xavier must
Many people simply do not know where their money goes. start by putting all of his fixed and variable expenses down
It’s important to start by taking stock of your situation, on paper. To do this, he can use the budget table in this guide.
figuring out what your needs and wants are and getting He realizes that there is little he can do about his fixed
to know the amounts of your income and expenses. expenses. In order to save money, Xavier can reduce certain
That’s exactly what preparing a budget allows you to do. variable expenses: supplies, outings, magazines, books, gifts,
It gives you an overview of your situation and helps you donations, etc. This is where his power to choose lies. He can
find room to manoeuvre so that you can save money for also use many of the tips in this guide to save without too
retirement and personal projects. much deprivation. Xavier will have to assess his priorities
and make some lifestyle changes. This will require resolve,
but Xavier accepts this as the price to pay now if he hopes
to pursue his passion for sailing in 30 years.You can also read
