Category:Retirement planning

Retirement is one of the major events in many people's lives, involving not only a change in lifestyle (see retirement living) but in many cases a reduction in income or change in sources of income. These changes generally require consideration in the pre-retirement period. Retirement planning should be part of your overall financial plan.

Canada's retirement income system has three main tiers or "pillars". Tier 1 consists of government benefits, namely old age security and the guaranteed income supplement for low-income seniors. Tier 2 is composed of mandatory public pension plans, i.e. the Canada Pension Plan or the Québec Pension Plan. Tier 3 consists of mandatory to voluntary savings schemes such as workplace pension plans, registered retirement savings plans, and other accounts (see tax deferred and tax free savings plans) which can be used for retirement savings.

A major component of retirement planning for most Canadians is saving money regularly when they are working (the third tier). The importance of saving early shows how compounding returns will help you to reach your savings goal. The article Savings rate explores two different approaches to determine "optimal" savings rates during the accumulation phase that aim to maintain the standard of living of the retiree. Such calculations are often linked with income replacement rates, the proportion of your final employment income you wish to replace during retirement.

There are two main schools of thought when it comes to retirement planning: conventional retirement planning and safety-first retirement planning. These calculations often require preparing a retirement budget for planning purposes. The budget depends on a number of factors, as discussed in preparing to retire. Retirement calculations can be assisted by using Canadian retirement software & calculators.

Withdrawal methods include sustainable withdrawal, variable percentage withdrawal and annuities.