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It pays to know your retirement income sources and options

It pays to know your retirement income sources and options

Where will your retirement paycheque come from? Most likely, it will be made up of income from a number of sources. By knowing what those sources are – and the different options available to you – you may be able to pay less tax and help ensure your income will be sufficient to fund your retirement dreams.

The government

Old Age Security (OAS) monthly benefits usually begin at age 65. Benefits are taxable, adjusted for inflation, and ‘clawed back’ in increasing amounts as your individual net income climbs above a threshold amount.

The Canada Pension Plan/Quebec Pension Plan (CPP/QPP) is intended to provide about 25% of your average annual earnings during your working life up to certain limits. Benefits are indexed annually for inflation and are taxable. Benefits can start as early as age 60..

Your company

Defined Benefit (DB) pension plans ‘define’ or guarantee a specific pension paid to you for your lifetime from the time you retire. The amount of your DB pension benefit is set according to your age, length of service and your salary and may or may not be indexed to inflation.

Defined Contribution (DC) pension plans, also known as a money purchase plans, do not guarantee the amount of your future benefits. DC retirement income depends on accumulated contributions and the investment returns earned by these contributions.


When you retire, your Registered Retirement Savings Plan (RRSP) can be converted to income in three ways.

  • A Registered Retirement Income Fund (RRIF) is similar to an RRSP except you withdraw from it instead of contributing to it. RRIFs offer the flexibility of selecting from a wide range of investment choices and choosing the amount of taxable income you wish to withdraw each month (subject to an annual minimum withdrawal based on the value of your RRIF and your age).

  • An Annuity offers the simplicity of guaranteed lifetime taxable income in set amounts that can’t be increased to compensate for inflation or escalating living costs.

  • Cash – by converting your RRSP to cash you will be subject to tax on the entire amount. This is not an attractive option in most cases.

The choices you make about the size and shape of your retirement paycheque are yours, and they will play a vital role in generating the retirement income you can expect to receive. I can help you understand all your sources of retirement income and build a plan to help your retirement dreams will come true.

Noël Hémond, Pl. Fin.

Consultant and Financial Planner

Investors Group Financial Services Inc.


Tel: 514-817-3483

About the author

Pl. Fin. Noël Hémond

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