6 Canada Retirement Income Sources To Help Keep The Cash Flowing

Canada retirement income is a topic on many people’s minds, especially those who understand that the earlier you begin planning for retirement, the better your finances will be when the time comes.

Building healthy habits at a young age will help you to continue them during your later years. But where do you start? What are the income sources you should consider when planning for your golden years?

Let’s take a look at a few sources of income that can help turn your blank slate into a well laid retirement plan.

Table Of Contents

• Government programs for retirement income
• Retirement income from personal savings
• Canada retirement income calculator
• FAQ

Planning for your Canada retirement income: Consider the government programs you may qualify for

The Canadian government has several programs and benefits in place to help support those planning for retirement as well as those who are currently enjoying their post-employment years. In fact, the government has been helping retirees since the Canadian Government Annuities Act took effect in 1908.

You’ve likely heard of some of the government programs available for retirement savings, but do you fully understand how they work and what they offer? Maybe not.

So let’s study them now.

1. OAS

Old Age Security, or OAS, is a huge part of the Canada retirement income system. It’s a taxable monthly payment designed as supplemental income for Canadians age 65 and older.

Unlike other government-sponsored forms of retirement income, OAS eligibility doesn’t depend on your employment history. Instead, you can receive this benefit if you:

• are 65 years old or more,
• are a Canadian citizen or legal resident,
• have lived in Canada for at least 20 years (since the age of 18), and
• have an annual income less than a certain amount.

The max annual income for qualified OAS recipients in 2022 is $81,761. This will very likely go up a bit for 2023.

If you prefer, you can choose to defer receiving your OAS payments until past the age of 65, but it isn’t recommended to defer past the age of 70. Waiting longer for these payments means each one will be a larger amount, but after age 70 the amounts won’t increase, and you risk losing the benefit altogether.

If you do choose to start receiving OAS at 65, you should get the first payment approximately 1 month after your birthday. As long as you file a tax return, you shouldn’t have to actually apply for this benefit, but it’s possible you may receive a letter from the government asking you to apply. But if you don’t receive either a payment or a letter requesting your application, you should contact Service Canada for further information.

Here’s a look at the maximum monthly benefit amount you can receive, depending on your age:

• Age 65 – 74: $685.50
• Age 75+: $754.05

OAS payment dates

And here are the remaining OAS payment dates for 2022 and 2023.

To learn more about OAS, see Old Age Security: Overview.

2. GIS

The Guaranteed Income Supplement, or GIS, is another example of how the Canadian government provides retirement income funds. It’s a monthly payment provided to seniors with low or modest incomes in an effort to help provide at least a basic income for this group of people.

There are a few eligibility criteria for receiving GIS. You must:

• be age 65 or older,
• live in Canada,
• already receive OAS, and
• have an annual income that’s less than a specified amount, depending on your relationship status.

Here is a bit more information on the income levels and relationship details that affect eligibility:

Anyone who’s eligible should receive a letter from the government that invites you to apply for GIS, and there will be a paper application attached to that letter. However, if you’re already receiving OAS but haven’t received this letter, you should reach out to Service Canada to inquire about an application.

You can also find applications online by logging into your My Service Canada account.

GIS payment dates

GIS benefit payments are provided alongside OAS benefits, so the payment dates are the same as mentioned above.

To learn more about GIS, see Guaranteed Income Supplement: What these benefits offer.

3. CPP and QPP

A huge source of Canada retirement income for many seniors are the Canadian Pension Plan (CPP) and the Quebec Pension Plan (QPP). Both provide benefits for anyone who’s contributed to either CPP or QPP throughout their working years, including:

• retirement benefits,
• disability benefits, and
• survivor benefits.

The biggest difference between the two programs is that QPP is specifically for those who live and work in Quebec, while CPP is for those in other parts of the country.

The table below provides an overview of the differences between the types of CPP:

CPP and QPP eligibility, start dates, and more

To qualify for these retirement income funds, you must be at least 60 years old and have made at least one contribution to either CPP or QPP (depending on where you lived and worked) during your employment.

Canadians can choose to begin receiving their Canada Pension Plan benefits as early as age 60, or any time after that. The longer you wait to take advantage of these payments, the higher your monthly amounts will be – until age 70. After that, there are no more increases.

Generally, most Canadians begin receiving CPP around age 65.

When you’re ready to begin receiving your CPP or QPP benefits, it’ll be a few months after you submit your application that the payments actually begin. For CPP payments, you should apply about 6 months before you want the payments to start, and with QPP, it’s recommended that you apply 3 months early.

The maximum monthly benefit amount you’ll receive from CPP in 2022 is $1,253.59, but there are several factors that can affect the amount you actually get. These include:

• if you make any CPP contributions after you turn 65,
• if you continue working while receiving CPP,
• if there were periods when you receive a low salary or none at all,
• if you spent periods of your life raising children (and not working outside the home),
• if you experienced periods of disability,
• if you engage in pension sharing, and
• if you’re going through a divorce or separation.

Looking for more detailed information regarding CPP payment amounts and dates? You’ll find all the details you need right here.

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How will your personal savings affect your Canada retirement income?

Of all the retirement income options in Canada, your personal savings is probably the area where you have the most control.

And we’re not just talking about the portion of your paycheque that gets deposited into your bank account each time. There are many different ways to earn and invest your money that will help your savings grow.

In this section, we’ll discuss a few methods and strategies for adding to your personal retirement savings.

4. Investments

One financial move that can benefit you both pre and post-retirement is to put money into investments.

Of course, seniors on fixed incomes may not want to risk too much in investments, but if you’re comfortable with it, here are a few of the safest investment options:

• HISAs,
• GICs, and
• bonds.

High interest savings accounts

One of the easiest and most popular investment vehicles is a high interest savings account, or HISA. Simply put, it’s a savings account that offers a much more impressive interest rate than typical accounts, allowing your money to grow much more quickly and effectively.

Most often, the HISAs with the best interest rates are those offered by online-only banks. For instance, these 4 accounts are from online banks and have some of the highest rates available in Canada right now:

• MAXA Financial High Interest Savings Account: 1.85%
• Outlook Financial High Interest Savings Account: 1.85%
• Oaken Savings Account: 2.8%
• EQ Bank Personal Account: 3%

Whether you open a HISA before you retire and use it to accumulate funds to use later, or if you open one post-retirement and use it to house your CPP payments or other income, this can be an easy way to keep your money safe and continually growing.

GICs

GICs, or Guaranteed Investment Certificates, are one of the lowest-risk types of investments you can make, which means they’re especially well suited for those planning for retirement.

You’re guaranteed to have the principal returned to you, plus at least some interest. So, If you’re using your retirement savings to invest in GICs, you don’t have to worry about losing any money at all.

There are various types of GICs, but each one allows you to deposit money and earn a specific interest rate for a predetermined amount of time – and this rate is usually guaranteed at the time of deposit.

Here are a few examples of some of the best GIC rates in Canada:

Note: These rates change often, so you should check the site directly to see the most up-to-date rate. The information in the above table was accessed on November 18, 2022.

Again, you’ll notice that with GICs, the best rates often come from online-only banks (although Canada’s big 5 banks certainly hold their own).

Bonds

Simply put, a bond is a sort of loan between you, the investor, and an organization or government body. The issuer is looking for funds to complete a project, and they provide a fixed interest rate on any money that you invest, usually for a specific period of time.

As with any type of investment, there are pros and cons to investing in bonds, which you can see in the table below:

As long as you purchase bonds from well-established sources, you can rest assured that you’ll earn on your initial investment. They may not be huge returns, but it’s all but guaranteed – which, again, is important if you’re a retired senior on a fixed income.

In order to make any of the investment choices we’ve discussed above, robo advisors can be a simple and convenient method for retirees (or anyone else) to accomplish their goals. And one of the top robo advisors available for Canadians is Wealthsimple managed investing.

Wealthsimple managed investing has a list of investment accounts to choose from, no requirement for minimum investment, and the convenience of a set-it-and-forget-it automated service. Altogether, these features make it a top choice for seniors who want to make the most of their retirement and not spend hours in front of a screen working the stock market.

Learn more here:

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5. RRSP/RSP (and RRIF)

An RRSP, or Registered Retirement Savings Plan, is exactly what it sounds like: a form of retirement savings that’s registered with the government.

The particular beauty of this type of savings plan is that all contributions are tax deductible. However, there are limits to how much you can contribute each year. But still, it’s only when you withdraw funds that you’re required to pay taxes.

There’s also the closely related RSP option, which is simply a retirement savings plan that isn’t registered, and it could consist of a variety of different investment types.

When it’s time to cash out

As fantastic as it is to be able to contribute to an RRSP, there is a limit to how long you can do this. The rules are that all RRSPs must be cashed out when you turn 71 – by the end of December in the year you turn 71, to be exact.

Luckily, though, there’s a good chance you’ll be retired by the age of 71 and likely in a lower tax bracket at that point. So even though you’ll be taxed on withdrawal, it won’t be as much as if you’d taken the money out in your earlier years.

If you don’t want to cash out at this time, your best and possibly only option is to transfer everything into an RRIF.

But what about RRIFs?

Another type of registered savings plan for your retirement is an RRIF, or Registered Retirement Income Fund. You can hold multiple types of investments within an RRIF and you won’t be taxed on anything until withdrawal, just like an RRSP.

Unlike an RRSP, though, you can’t continue to contribute to your RRIF. Instead, you can only transfer from an RRSP or another RRIF.

There are also rules regarding how often and how much you can withdraw. During the first year, you don’t have to worry about withdrawal requirements, but after that you’ll need to make at least 1 withdrawal each year of a specified minimum amount.

This minimum amount is calculated by measuring your account’s market value and using a percentage that’s determined by your age.

6. Working after age 65 (during retirement)

There are plenty of seniors who choose to continue working after their official retirement. In fact, a study on Working seniors in Canada released in 2017 showed that 1 in 5 Canadians aged 65 and up spent at least some time working during the year – that’s 1.1 million people.

Yes, continuing to work during your retirement years can beef up the bank account, but it’s not the only reason people choose to do this. And it’s not for everyone.

Take a look at the pros and cons of retirees going back to work:

Let’s take a look at these pros and cons in a bit more detail.

Extra income vs. affecting government benefits

Everybody wants more income, right? Continuing to work and receive paycheques into your later years can be a significant boost to your bank account – after all, not having a steady source of income during retirement can be a stressor.

Even though it helps your savings grow and this fact calms your fears, making too much money in your later years can affect your government benefits. OAS and GIS both have limits on eligible recipients’ income levels.

Is it worth it? It really depends on your individual circumstances, but do the math before making any long-term decisions about continuing to work.

Eases boredom vs. less time for hobbies and relaxation

Many people enjoy the routine and familiarity of going to work every day. Spending too much time at home without a set schedule and/or list of tasks to accomplish can be stressful, maybe even perplexing. You can feel totally lost, instead of feeling the complete freedom you may have expected.

In this case, going back to work can be a good choice, as it’ll ease your stress and discomfort by giving you the routine and sense of accomplishment you felt were lacking.

But if you’re not someone who feels the need for the structure and purpose that a job provides, going back to work means you’ll have less time to devote to the things you enjoy most. You won’t be able to spend those precious daylight hours in the garden, won’t be able to spend long periods of time at the family cottage, and certainly won’t be able to travel as frequently as you’d like.

Maintains social interactions vs. time away from family

For lots of people, work is their main source of social interaction and it can be difficult for these people to suddenly find themselves at home all the time with nobody to talk to. But even if it’s not your only source of socialization, it can still be hugely important and leave you feeling a sense of loss and loneliness when you’re not there seeing people every day.

Of course, being at work, even if it’s just part time, means you have less time to spend with your spouse/partner, friends, and family. And this is often what people look forward to most about their retirement years, so giving it up to spend time at work can be very frustrating.

Can improve health vs. can increase stress

Keeping your mind active with all the concerns and duties that a job requires can be a real benefit to Canadians in their later years. And if your job requires physical activity, that naturally means that your physical health is being affected as well.

Suddenly giving up the mental and physical stimulation your employment provides can be a shock to the system. Unless you’re careful about replacing these sources of mental and physical activity, you may start to see a decline in either area – or both.

On the other hand, work is one of the areas where many people feel they’re most stressed. Some common stressors at work include:

• the size of your workload,
• the pace of your work environment,
• lack of proper training,
• the level of responsibility you carry,
• inadequate compensation,
• prejudice or discrimination in the workplace, and
• poor communication amongst coworkers and management.

This is just a quick intro into the long list of workplace stressors, but it’s enough to show that this type of stress can impact your personal life too. And that certainly tarnishes the image of a relaxing retirement lifestyle.

Canada retirement income calculator

A huge part of planning for retirement is figuring out how much money you’ll need to retire while still supporting your preferred lifestyle. And, luckily, the government has a handy tool to help with this.

To use the Canadian Retirement Income Calculator effectively, you’ll need to have this information nearby, as it applies to you:

• CPP Statement of Contributions,
• QPP Statement of Participation,
• details on your employer pension,
• RRSP statements, and
• statements from other savings that will contribute to your monthly retirement income.

With these details entered, the calculator tool will help you determine the amount of money you’ll need to comfortably retire.

Do you have plans for your retirement income?

As you can see, there are many details regarding Canada retirement income sources to consider when setting up your retirement plan. You’ll get some benefits from the government, but much of it rests on your own shoulders.

Have you already begun your retirement planning, or are you already retired? Which of these types of retirement income sources have you taken advantage of? Do you have any tips for those on their planning journey?

We love to hear about our readers’ experiences, so please feel free to leave us comments in the section below.

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