Financial Simplicity - Part 15 - What the Government Will Cover

Once you’ve determined how much income you’ll need in retirement, the next step is figuring out how much the government will help cover. In Canada, the key programs are the Canada Pension Plan (CPP) and Old Age Security (OAS), and they can make up a significant portion of your income - especially if you plan wisely.

CPP is a contributory pension program based on your working years and income level. If you’ve worked and contributed steadily, you’ll receive a monthly amount starting as early as age 60, or you can delay until age 70 to receive a much higher payout. OAS, on the other hand, is a flat-rate benefit available at age 65 to Canadians who have lived in the country for at least 10 years after age 18. Like CPP, you can increase your benefit by delaying up to age 70.

These programs were designed to prevent poverty in retirement and not to fully fund your lifestyle. But they can take a serious bite out of your retirement funding needs, especially for lower or moderate-income earners. In our examples, a moderate $100,000 household retiring at 65 could receive nearly $15,000 annually from CPP and OAS, which is about 30% of their total retirement goal. Wait until 70, and that number is around 40%.

Timing matters. Retire early, and you’ll have to make up the difference with your own savings, possibly for several years before CPP and OAS even begin. Retire later, and government benefits could cover a larger share, reducing the pressure on your personal savings.

How this fits the matrix:
This article adds the first major income stream into your retirement plan. It highlights the power of timing and how your government contributions today shape your benefits tomorrow.

How a financial advisor can help:
A financial advisor can project your estimated CPP and OAS benefits based on your work history and help you decide the optimal age to begin collecting. They can also coordinate benefit timing with your other income sources to minimize taxes and maximize stability.

In the next article we’ll explore how the age you choose to retire affects the entire picture, from your government benefits to how many years of income you’ll need to fund.

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Disclaimer: This content is for informational purposes only and does not constitute financial advice. Mutual funds provided through Carte Wealth Management Inc. Insurance products and services offered through Carte Risk Management Inc.