Navigating Retirement in Canada: What to Do when You Reach 65 with Less Than 150K in Savings

In Canada, reaching the age of 65 can be a challenging time, especially if you have less than 150K in savings. This article aims to provide guidance on navigating this phase, exploring the available financial resources and strategies to improve your financial situation.

Understanding Retirement in Canada

While 150K in savings might be considered well above average for many Canadians, it may not be sufficient for a secure retirement. Notably, there is no mandatory retirement age in Canada, and individuals can continue working beyond 65 in most professions.

You can generate a steady monthly income from your savings, allowing it to grow over time. Combined with additional sources like Canada Pension Plan (CPP) and Old Age Security (OAS), along with lifestyle adjustments, you can achieve a better financial situation than the majority of Canadians.

Government-supported Financial Programs

If your income is low, you may qualify for Old Age Security, which has a threshold of around 115K per year. This benefit is added to the income from CPP. The basic monthly amount for OAS is approximately 570 CAD, but it is clawed back once your income exceeds about 70K CAD.

The Canada Pension Plan (CPP) is a government-funded program funded by compulsory contributions from workers. Current contributions are around 4.95% of your income, or 9.9% for self-employed individuals. The total amount you receive in CPP depends on the contributions you have made over the years.

Maximizing Retirement Benefits

The maximum CPP retirement benefit for 2016 was 1092.50 CAD, but many individuals receive less. When you reach 65, you can also apply for the Old Age Security Pension (OAS). This is a non-contributory social assistance program funded by federal government tax revenues. The maximum monthly OAS pension for 2016 was approximately 570.52 CAD.

For those who meet both criteria and are in receipt of both benefits, the total can amount to 1663.02 CAD. However, these benefits are not always enough to cover all needs. You can also apply for the Guaranteed Income Supplement (GIS), which must be applied for separately. The maximum GIS monthly amount for 2016 was 773.60 CAD, but it is clawed back based on total income.

Alternative Solutions

If even these benefits are insufficient, you may consider the option of a reverse mortgage. This solution is particularly useful for individuals who do not wish to leave any assets to heirs and can benefit from utilizing the equity in their property.

Each individual's circumstances are unique, and consulting with a financial advisor is crucial to maximizing the benefits available to you.

Conclusion

Navigating retirement in Canada with less than 150K in savings can be challenging, but with careful planning and the utilization of available resources, you can improve your financial situation. Understanding and maximizing government-supported programs such as CPP, OAS, and GIS can provide substantial relief.

For more personalized guidance, it is recommended to consult with a financial advisor.