The four pillars of retirement Canada and the USA

 In the past week or so, I posted about the four pillars of retirement. We have this in 
Canada, but many Canadians who are approaching retirement are not as familiar with the term as they should be.

In Canada, the four pillars of retirement planning are designed to provide a comprehensive financial support structure for retirees. These pillars are essential for ensuring income security in retirement and include both public and private sources of income. Here’s a breakdown of the four pillars:

1. Old Age Security (OAS)

• Description: The OAS is a government-funded pension available to most Canadians aged 65 and older who meet residency requirements. It's a taxable monthly payment that provides basic income support.
• Eligibility: To qualify for OAS, you need to have lived in Canada for at least 10 years after turning 18. The amount you receive depends on how long you’ve lived in Canada after the age of 18, with the maximum benefit requiring 40 years of residency.
• Other Features: There is also an additional benefit called the Guaranteed Income Supplement (GIS) for low-income seniors who receive OAS.

Key Resource for more infomation: Service Canada – OAS and GIS

2. Canada Pension Plan (CPP) / Quebec Pension Plan (QPP)

• Description: The CPP (or QPP in Quebec) is a contributory, earnings-based program. During your working years, you and your employer make contributions to CPP/QPP, and these contributions are used to fund your retirement pension.
• Eligibility: To qualify, you must have made at least one valid contribution to the CPP or QPP. The amount you receive depends on your contribution history and the age you start collecting (you can begin as early as age 60 or delay until 70 for increased benefits).
• Other Features: The CPP also provides disability benefits and survivor benefits to eligible family members in the event of a contributor’s death.

Key Resource for more information: Service Canada – CPP

3. Employer Pension Plans (EPPs) / Workplace Retirement Plans

• Description: Employer-sponsored pension plans are private pension plans that employers offer to their employees. They come in two main types:
• Defined Benefit Plans: Guarantee a specific income in retirement, based on factors like salary and years of service.
• Defined Contribution Plans: Your retirement income depends on contributions made to the plan and the investment returns on those contributions.
• Participation: If you work for an employer that offers a pension plan, it’s wise to join and maximize contributions, as employers often match a portion of your contributions.

Key Resource for more infomation: Financial Consumer Agency of Canada – Employer Pensions

4. Personal Savings and Investments

• Description: The fourth pillar includes any savings and investment strategies you personally undertake to fund your retirement. This can include Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), non-registered investments, real estate, and other assets.
• RRSP: A tax-deferred retirement savings account where contributions can be deducted from taxable income, and taxes are paid when the funds are withdrawn in retirement.
• TFSA: Allows you to invest and withdraw funds tax-free. It’s flexible and can be used to complement RRSP savings.
• Importance: Personal savings give you more control and flexibility over your retirement income, supplementing public pensions and employer plans.

Key Resource: Financial Consumer Agency of Canada – RRSPs and TFSAs

Together, these four pillars—OAS, CPP/QPP, Employer Pension Plans, and Personal Savings—create a foundation to ensure Canadians have multiple sources of income during retirement. It’s essential to plan and contribute to each pillar wherever possible to secure financial well-being throughout retirement. My next post will look at the four pillars in the United States.