The Ultimate Canadian Retirement Planning Guide [2024]

Retiring can be a very stressful time. It’s a big decision that can impact all aspects of your life. There are so many decisions to make, like what to do with your assets, how to invest, how you want to spend your time, what you want to do in retirement, and what you think will help you live the kind of life you want.

Investing is a very complicated topic. If you don’t have the time or knowledge to invest, it’s important to use a Certified Financial Planner (book a call with one from Pension Solutions Canada for free here). A Certified Financial Planner can look at your finances, identify your goals, and then develop a strategy to help reach them so you can enjoy a worry-free retirement to the fullest!

In this guide for 2024, we’ll cover a lot of the most common questions and topics surrounding retirement planning. Starting out with how the concept of retirement and the retirement landscape has changed in Canada, how much you need to retire, knowing the type of pension plan you have, a checklist of next steps when you’re close to retiring, and common questions about Copycat (Mirror Annuity)Commuted Value, Lump-Sum Payments, and more.

Retirement in Canada Has Changed

Retirement isn’t how it used to be when our parents retired. The workforce has changed, lifestyles have changed, and many other factors need to be taken into account for Canadians retiring soon:

  • Companies and retirement plans have changed.
    It used to be that the company you worked for would be the one place you worked for your entire career. Pension funds were robust and well-funded. Today, workers move between companies and bring their pensions with them. Contract labour is on the rise, some without pension options. Companies go bankrupt or have massive layoffs, making them untrustworthy to keep your pension with your company. Pension funds have changed.
  • Companies are offering buyouts.
    Today, more companies are offering buyout offers to their senior employees to encourage an earlier retirement, and allow them to downsize or save on wage cost.
  • Greater life expectancy of 83 years.
    Our average life expectancy continues to rise. You can now expect to be living longer into retirement, some studies showing you’ll be living till you’re at least 83 years old. This means your retirement period could last 20 to 25+ years and the expectation that you can get away with planning for a shorter retirement window is no longer realistic.
  • Retirement aspirations and goals have changed.
    Canadian retirees are choosing not to downsize or move into retirement communities. Instead, they are preferring to stay in their homes and live active lifestyles. This leads to requiring a higher retirement income level to maintain that active lifestyle.
  • Inflation and cost of living continues to climb.
    Inflation has a big impact on your retirement now more than ever. Your cost of living has gone up exponentially, which means you’ll need more retirement funds to keep paying for your everyday expenses.

As you can see, the retirement landscape has changed, and with the pandemic affecting us all, there are rules and other factors changing on a regular basis that can have a big impact on your retirement plans. 

Below you’ll find resources and explanations to a lot of questions we get asked about frequently at Pension Solutions Canada. If you have any questions about what you read on this page, click here to book a 15-minute Zoom call with us.

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How Much Money Do You Need To Retire In Canada?

Knowing how much money you will need to retire can be tricky, but it’s important to get a handle on this before you retire. You don’t want to find yourself in a situation where you are completely dependent on others for your income.

Think about how you’re going to be able to pay for your lifestyle without working.

A lot of people have the misconception that they need to live a certain lifestyle in order to retire happy and enjoy the freedom it brings. But, in reality, retirement is about being able to enjoy your time off without having to work full-time.

Canadians estimate, on average, they’ll need $756,000 in personal savings for a comfortable retirement, according to a survey by the Canadian Imperial Bank of Commerce (CIBC).

It is also recommended that when planning for your retirement, you should always aim higher because it’s better than not having enough money when you get there.

Click here to read our blog post about how much you’ll need to retire comfortably in Canada.

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How Much Money Do Retirees In Canada Typically Spend Each Year?

When it comes to retirement on your 65th birthday, will you have enough to life off of for the rest of your life?

If you are like most people, the answer is no.

In fact, according to a study by CIBC, the vast majority (90 per cent) do not have a plan to achieve the lifestyle they want in their golden years. What’s worse, most Canadians (65 per cent) don’t seek expert advice to get retirement ready.

People like to spend more when they retire. You might travel more, purchase a car or yacht, buy a vacation home, eat out more often and buy higher quality consumer goods. But if most people’s spending goes up during retirement, is there a point where this starts to become unsustainable?

Have you thought about your 80th birthday?

Most people imagine having financial security by then, ready to retire and enjoy a stress-free lifestyle. However, have you considered the cost of that dream lifestyle goal? Retirement calculators can help you not only figure that out, but help you plan what you need to save today in order to reach that future retirement goal.

Many people are not aware that a simple online retirement calculator can give them a better picture of how much they will need to save for retirement. Knowing how much money you’ll have at retirement age will help you set realistic plans for living expenses and let you know how much money you’ll have left over to spend on items for your enjoyment.

Planning to purchase a boat or car? Vacation cruise or travel? New house near a beach? There are many possibilities you can plan for, but in order to achieve those goals you’ll need to calculate how much you’ll be investing each year and setting aside for that retirement future.

Here are some important points you have to consider when using retirement calculators:

  1. Your current age and anticipated retirement age
  2. Life expectancy
  3. Inflation rate
  4. Current retirement savings you have
  5. Pension/CPP Disbursements
  6. Rate of ROI (return of investment) / Annual interest rate

Each will have an impact on your results. For example, the age numbers you enter into the retirement calculator will greatly affect the results because the available years from your current age up to your desired retirement age will determine the amount of savings you have to accumulate in order to reach your retirement goal. If you have lesser years to save, then your retirement calculator will tell you that to invest more money if you want to retire with a larger amount in your bank account to live off of.

When entering your “Rate of Return Of Investment,” be conservative and use a lower rate than what the current or even the best possible rate available might be, giving yourself a realistically achievable goal that takes into account market fluctuations.

Experiment with the different variable factors to see how they affect your results. Maybe an earlier retirement is a possible achievable goal for you, or maybe working an extra 2 or 3 years from your originally desired retirement age yields you greater results than expected.

Remember: Retirement Calculators Are Not A Replacement For A Certified Financial Planner!

It is important to know that online retirement calculator tools are not a replacement for a Certified Financial Planner (CFP). They are, after all, only tools. Don’t depend on the tool alone. Always seek a certified financial planner to help walk you through each of the calculation steps. 

There are a lot of variables in retirement planning. Retirement calculators are not going to be able to take into account all of your individual circumstances and give you the best advice for your specific situation.

Retirement calculators don’t know about your unique financial goals, they don’t know how much risk you’re willing to take on, what kind of investment portfolio you already have or if you’re using any tax-advantaged accounts like a TSFA, and they certainly can’t tell if there are other things in life that might be more important than saving money for retirement — like paying off debt or buying a smaller house or cottage for retirement. Because of this, you can’t rely on them to advise you on the complex financial decisions you have to make when it comes to your investments.

So when people use these tools without professional help, they may end up with too little saved for retirement (or worse yet, nothing at all). Or maybe they’ll save too much and end up missing out on opportunities in life because their focus was always on saving money instead of living life. This is why having an experienced Certified Financial Planner who knows how to use these tools will get you the best results possible.

Schedule a call with one of our Certified Financial Planners today.

What about debt?

Don’t take debt into retirement. Period. Consider this: you have a mortgage. You pay $12,000 per year interest + principle. If your earnings are $80,000 / year after tax, you’re paying 15% of that income to this debt. Now you retire, your retirement income drops to $48,000 / year after tax. You are now paying 25% of your income to this debt. That is going to hurt! Don’t take debt into retirement. Keep working.

What age should I retire at?

A common question that is asked is… “At what age should I retire given my present retirement fund and future, planned investments?” Luckily for you, we’ve put together a Retirement Age Calculator to help you make that decision easier!

Our calculator will help you know your Projected Retirement Age, the Number of Contributions, and final value of your retirement fund at that specific age.

Types of Retirement/Pension Plans

There are different types of pension and retirement plans you should be aware of when retiring in Canada. Not all employers have these plans, so you’ll want to double check with them before retiring.

Company pension plans

Some companies offer a pension plan. Always make the maximum contributions, especially if your employer matches you dollar for dollar on your contribution amount. Know whether your plan is a Defined-Contribution Plan or Defined-Benefit Pension Plan, and understand the differences between the two.

Defined Benefit Plans

Some plans are called defined benefit plans. These are the most common plans. They are also sometimes referred to as “final-pay plans”, because the amount you receive from the pension plan depends on the pension you were earning near the time you retired. Your yearly pension is based on a formula that takes into account your salary near the time you retire.

defined benefit pension plan is a type of pension plan where the company you work for (your employer) ‘sponsors’ your retirement plan by promising a specified pension payment.

The great thing about defined-benefit pensions is that employers guarantee a very specific retirement benefit amount for each participant in the plan.

The plan is called ‘defined’ because the benefit formula is defined and known in advance. This way you can do the calculation based on their formula and know exactly how much your pension is worth and what you’ll be paid out when you retire.

The amount that your defined-benefit pension plan is ‘worth’ is based on many factors such as:

  • Your salary / earnings history
  • Years of service
  • Age

One of the largest risks with having a defined-benefit plan that is managed by your employer is that the returns on the investment may go up or down, and it’s up to your employer to make sure that the pension fund is able to cover your defined-benefit amount when you retire.

This is a very important point to consider when deciding to leave your pension with your company, or take it elsewhere. Is your company in a stable industry? Is your company financially strong? Do you foresee your company potentially going bankrupt in the next 10, 20, or 30+ years?

Example: Sears Canada’s Pension Fund was short $133 million, according to court documents, and 18,000 retirees had their pensions cut by 20 per cent after the retailer folded and left behind an underfunded pension plan. This resulted in a lawsuit.

You can minimize this risk by moving your defined-benefit pension plan to a secure financial institution via a copy-cat annuity.

Defined Contribution Plans

Other plans are called defined contribution plans. These plans are based on the amount of money that you and your employer have deposited into the plan. The amount of pension you’ll receive when you retire depends on the amount of contributions you’ve made to the plan, the interest earned on the contributions, and the length of time that you’ve been making contributions.

Deferred Profit Sharing Plans

Your employer may also have a Deferred Profit Sharing Plan (DPSP) for you upon retirement. Contributions into this plan can only be made by your employer. Those contributions, as well as any forfeited amounts that are reallocated to a beneficiary, are included in your pension credit for a year. The pension credit represents the benefit earned during the year and it reduces the amount that you can contribute to your registered retirement savings plan in the following year.

Registered Retirement Savings Plan (RRSP)

With an RRSP, the government gives you a RRSP contribution limit every year. You’ll want to max out your RRSP contributions each year because it helps to lower your taxable income.

Tax-Free Savings Account (TFSA)

A TFSA is a financial account that you can use for investments and not have to worry about having those funds taxed when you withdraw them. Your savings to grow tax-free! However, there is a limit each year on how much money you are allowed to put into your TSFA.

Investment Accounts

These are taxable and include things like stocks, bonds, mutual funds, GICs, etc. If you’re putting your retirement funds into an investment account, just be sure you understand the risk level because market fluctuations can have a big impact on your funds.

Pension Adjustments

If you’re about to retire, you can also ask your pension plan administrator for a copy of the Statement of Pension Adjustment (S.O.P.A.). This statement shows the value of benefits you earned under your employer’s Registered Pension Plans or Deferred Profit Sharing Plans.

Read The Information Your Employer Sends About Your Pension Plan Carefully

The information you get from your employer about your pension plan will help answer some critical questions you should know the answers to in order to prepare for your retirement. If you don’t get the answers from the informational material your employer provides, be sure to call someone in the HR department and ask them questions so you have the answers you need.

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Next steps when you are close to retiring

1. Review the information your employer sends employees about your retirement plan. If you are just starting to plan your retirement and want help doing so, consider consulting with a certified financial planner and pension expert by calling us at 1-888-554-6661.

2. Make sure your employer is aware of your plans to retire. If your employer is a big company, chances are it has resources to help you. Contact your employer or pension plan administrator to let them know that you plan to retire soon, and ask them the important questions you might have about your pension plan such as:

    • What type of pension plan are you registered in? (eg. Defined-benefit, Defined-contribution, etc).
    • How does your employer calculate the amount you will receive when you retire?
    • What happens if you leave the company before you can collect your pension?
    • What happens if the plan goes bankrupt?
    • How much money has been contributed to the plan, and how much money will be left when you are eligible to retire?
    • How much of your contributions are tax deductible?
    • Are you able to retire early? If so, how will it affect your pension?
    • How much will your beneficiaries get if you die before you reach the normal age of retirement?
    • Who will get your pension if you die before you reach the normal age of retirement?

3. Find out if you have to make any special pension-related decisions while still working

4. Determine how much money you need and what your monthly expenses will be in retirement. For example, if you are currently paying $1,000 a month for housing, what will that expense be in retirement? Do you have any debts such as credit cards or car loans? These questions will need to be answered so that you can accurately determine how much money you will need in order to maintain your current lifestyle once you stop working. Work with a financial professional to create a financial plan that allows for a steady retirement income so you can continue paying your bills while having some extra cash to enjoy and spend on non-essentials.

5. Make sure you have health insurance in place when retiring so that you are covered if you fall ill or have an accident. If your health deteriorates in retirement, this could force you to leave your home. Budget for medical costs and medication costs, especially if you are in the age group that is more likely to require medical care. In retirement, you can expect to have a higher out-of-pocket cost for health care.

6. Make sure you have life insurance and adequate disability insurance in place when retiring so that your family can be taken care of in the event of your death.

7. Set up your bank accounts for direct deposit of your pension. This is the most convenient way to receive your pension.

8. Get rid of debt. Pay off credit cards or student loans before retiring. Those bills are not going away when you retire, and paying them will be one less thing you’ll have to worry about when you stop working. If you’re not paying them now, you will be when you retire and it will be harder to pay them then.

9. Make arrangements for your utilities. It’s important that you keep your utility bills as steady as possible. Most utility companies allow you to setup a fixed monthly payment that doesn’t change from month-to-month, averaging out your usage over the year. This keeps your payments predictable and easier to budget for now that you will be moving to a fixed income.

10. Plan a vacation before you retire (use up those remaining vacation days!).

11. Decide where you’ll be living. What will you do with your home? Will you rent or own your home? If you rent, how much will your rent cost? If you’re moving out of your home, arrange for the sale of your home and the move to your new home. If you are thinking about moving to another part of the country, be sure to take into account the cost of living. Consider moving to a retirement community. These communities can be affordable and are set up for retirees to enjoy the comforts of home and a wide variety of activities. You may want to consider downsizing your home. You may be able to find a place that is more manageable for you and will be more affordable, especially for property taxes.

12. Contact your lawyer to make arrangements for any changes to your will when you retire because you may have different estate plans as a retired person than you did when you were employed. If you own your own business, it’s important to review your will and trust documents. There may be special considerations that need to be addressed in the event of your death or incapacity.

13. You may want to look into senior transportation options and budget for those costs. If you are not able to drive, there are many options that will allow you to get around.

14. Start a travel fund. You should save a certain amount of money each month to help you travel. You can travel around the country and even the world. If you are planning to travel, consider using a senior discount program for airfare and other transportation needs. Don’t forget to factor in health insurance costs and costs associated with travel.

15. Make sure you have a good credit rating, especially if you want to rent a house, buy a car or take out a loan.

16. Consider getting a part-time job to supplement your income. Here are 8 questions to ask yourself to help you make a decision.

17. Find an activity that you enjoy and can do in retirement to keep you active. You can choose to go to classes, volunteer, or get involved in an organization. Here’s a list of 72 things to do in retirement to get you started.

18. Review your retirement plan and estate plan with a Certified Financial Planner, speak with one today at Pension Solutions Canada by calling 1-888-554-6661.

The answers to these questions will help shape your retirement plan. When planning for retirement, you’ll also want to plan your retirement goals. Click here for steps to do that.

Obtaining A Final Pension Statement

Once you retire, or you are laid off by your employer, they will provide you with a pension statement that has the ‘commuted value’ of your defined-benefit pension plan on it.

Bond rates change every day, so it’s important to get this final statement with an actual final value amount (the commuted value) so you can start to plan with your Certified Financial Planner what you’ll do next with that amount of money. You can also take that final pension statement and shop around for a Copycat Annuity from a Canadian financial institution, which may also lead to a cash surplus (extra bonus cash paid to you on top of your pension).

Depending on the company you work for and how long you’ve worked there, the commuted value of your pension could be 500k, 800k, or even 1 million dollars or more, so choosing how to manage that money is a critically important decision.

You’ll be presented with a choice between:

  1. A “lump-sum distribution”, which is a one-time payment from your pension administrator.
  2. A “regular pension payment” (also referred to as a Lifetime Monthly Benefit), where you receive a set monthly payment for life. In some cases, depending on your plan, this can continue after you pass away and payments are sent monthly to your spouse until he/she passes.

Click here to read our blog post about obtaining a final pension statement.

Copycat (Mirror Annuity) vs. Commuted Value

The “Copycat” (Mirror Annuity) Option

The copycat or mirror annuity is a popular choice for employees coming out of a defined benefits pension plan. Whether you are retiring or being terminated, you can receive the same pension from a Canadian insurer that your employer promised you. 

For example, let’s say you are entitled to $3,500 per month for life plus a bridge payment of $800 per month to age 65. Also, your spouse will have a reduced pension should you die first.Revenue Canada will allow you to move that pension to a Canadian insurance company who will provide you the same pension, same bridge and the same spousal pension.

The question to ask yourself is not whether the pension is currently fully funded. The question is, will my company be financially healthy in 25 or 30 years. Like it or not, you’re going to live a long time. Don’t wake up at age 82 to find that you will see a reduction in monthly pension income.

So, the insurance company is going to pay you for the rest of your life.

They are going to match your company pension dollar for dollar.

The insurer will match the bridge and the spousal pension. In fact, Revenue Canada only allows this option if it is a mirror.

Advantages of Copycat Annuity

The copycat or mirror annuity is a popular choice for employees coming out of a defined benefits pension plan. Whether you are retiring or being terminated, you can receive the same pension from a Canadian insurer that your employer promised you. 

For example, let’s say you are entitled to $3,500 per month for life plus a bridge payment of $800 per month to age 65. Also, your spouse will have a reduced pension should you die first.Revenue Canada will allow you to move that pension to a Canadian insurance company who will provide you the same pension, same bridge and the same spousal pension.

There is a chance that when you get a copycat annuity, the Canadian insurance company could provide you bonus ‘surplus cash’ ONTOP of what your company promised you for your pension! This is surplus money that your employer sends to the insurer, which isn’t needed in order to copycat.

This can be a pleasant surprise, where we’ve seen clients getting a cheque for $5,000… $10,000… even as high as $70,000 in surplus cash, simply for purchasing the copycat annuity.

Copycat annuity is NOT the same as taking the commuted value option

Unlike when you take the commuted value (lump sum) and manage the money yourself, a copycat annuity will be paid out to you for life and is managed by the Canadian insurance company. This gives you peace of mind knowing that your money is professionally managed by a trusted, Canadian financial institution such as Canada Life or Sun Life.

Click here to book free consultation to analyze and discuss your pension options.

The Commuted Value Option

Commuted value is the net present-day lump sum value of a future pension benefit. The total amount of your pension’s commuted value (CV) is calculated using standards, as required under the Ontario Pension Benefits Act, and depends on many factors including future interest and mortality rates, and inflation.

When you retire, you have the choice of taking a lump sum payout of your pension’s commuted value or a pension lifetime monthly benefit.

Your pension commuted value is not determined by investment returns on the pension plan’s assets.

Once you retire, or you are laid off by your employer, they will provide you with a pension statement that has the ‘commuted value’ of your defined-benefit pension plan on it.

Depending on the company you work for and how long you’ve worked there, the commuted value of your pension could be 500k, 800k, or even 1 million dollars or more, so choosing how to manage that money is a critically important decision.

You’ll be presented with a choice between:

  1. A “lump-sum distribution”, which is a one-time payment from your pension administrator.
  2. A “regular pension payment” (also referred to as a Lifetime Monthly Benefit), where you receive a set monthly payment for life. In some cases, depending on your plan, this can continue after you pass away and payments are sent monthly to your spouse until he/she passes.

Advantages Of Taking The Commuted Value

Jon Hreljac (CPA, CFP, TEP), Retire & Estate Planning Services at Manulife Financial, shares a great presentation about the advantages and opportunities that come with taking the Commuted Value. Watch the video below. Ready to get started? Call 1-888-554-6661 to chat with Bruce.

More Important Points To Know About Copycat Annuities:

  • Just like your employer’s pension, a copycat annuity is a lifetime income that is guaranteed to be paid even after you pass away. If you die before receiving all of your income, a copycat annuity will continue to pay out the rest of your income to your spouse or another beneficiary.
  • Copycat annuities are open to all members of defined-benefit pension schemes, including public sector workers, teachers, auto workers, and just about anyone else who has a defined-benefit pension through their employer.
  • The interest rate on your annuity will be linked to the consumer price index (CPI) – which is the measure of inflation – and this will automatically increase each year. This means you can be sure you won’t fall behind on inflation.
  • Copycat annuities put you in control. You can choose your own annuity provider. There are no restrictions on which provider you can choose. At Pension Solutions Canada we are an independent firm, not tied to a specific company. This means you’ll get completely honest, unbiased recommendations and a truly customized solution tailored to you. We work with all the major providers including Canada Life, Sun Life, and Desjardins with a focus on exceptional customer service.
  • As mentioned earlier, there is a chance that you might receive a substantial lump sum of surplus cash.
  • All the Canadian insurance companies that we work with at Pension Solutions Canada are financially solid and 100% Canadian. They manage a lotof money. For example, Sun Life has over CAD$1 trillion in assets under management operating in a number of countries. Your employer simply doesn’t have the same scale or assets under management as a financial institution.
  • Canadian insurance companies such as Canada Life (formerly Great-West Life) and Sun Life Financial have been around for over a hundred years. Canada Life is approaching 130 years in business, and Sun Life have a history spanning back to 1865. These are Canadian institutions that aren’t going anywhere any time soon. They are not “amalgamating” back to a foreign head office in a different country, moving overseas, or going bankrupt like many companies are during these uncertain economic times (example: Sears Canada cut their pensions by 30%!).
  • For the Canadian insurers that we work with, pensions and life insurance is their primary It’s what they do, and they do it really well. They don’t make cars or trucks or refrigerators, they manage finances. They have a proven and successful track record in Canada. You can sleep well at night knowing that your money is with a company that is financially stable with a widely diversified investment portfolio and diversified global operations.
  • In the unlikely case that a Canadian insurance company were ever to go bankrupt, there are protections in place (such as Assuris) to help you which are far better than what you get if your employer goes bankrupt. When you leave your pension with your employer, it has some Federal protections, however, moving your pension to a Canadian insurer with a proven track record can help de-risk your retirement income and lower the chances of seeing a pension cut due to your employer going bankrupt.

How Bond Yields Impact Commuted Value

Taxes on Your Pension Withdrawal

One thing that hasn’t changed in a long time in Canada, are the taxes surrounding your pension payout. When you take your pension out as a lump sum, there is a hefty tax hair cut and a significant amount will be immediately taxed, typically hundreds of thousands of dollars. This is primarily because of outdated Canadian legislation from 1990. Why is this bad? If you are terminated by your employer and the company you’ve been working at for many years abandons you, you likely don’t want to leave your pension with that company and may want to take the cash to set up your own investment for your retirement. This outdated tax legislation penalizes you for doing that. We’ve started a petition online to help change this. Sign it here.

Retirement Planning Canada Pension Guide

Lump-Sum vs. Regular Pension Payments: Pros & Cons

If you have a defined-benefit pension plan through the company you work for, you will be faced with the decision to either:

a) Accept the traditional, lifetime monthly payments or…

b) Take a lump-sum distribution, ‘cash’ payout of your pension.

The lump sum cash payout sure is tempting! Your pension commuted value could be 500k, 800k, or even 1 million dollars or more. Think of all the things you could do with that type of cash!

There are pros and cons to taking the lump sum cash payout. Let’s review some of them:

Pros of a Lump-Sum Pension Payment

  • It’s a one-time payment from your pension administrator.
  • You gain access to a large sum of money right away.
  • Lump-sum payment gives you more control and flexibility over your money, allowing you to spend or invest it how you see fit.
  • The amount you withdraw from investments can changed based on your retirement lifestyle needs.
  • The lump sum amount you receive, after taxes are deducted, can be reinvested.
  • If you die earlier than expected, there could be funds left over to be used as inheritance with your estate.
  • Once you and your spouse die, the pension payments might stop if you are on a regular pension payout. However, with the lump-sum distribution option you could name a beneficiary to receive any money that is left after you and your spouse are gone.

Cons of a Lump-Sum Pension Payment

  • Income from pensions is taxable, and in Canada it is a big tax ‘haircut’ when you take the lump-sum cash. A significant amount will be immediately taxed, typically hundreds of thousands of dollars.
  • The biggest risk is that your pension is no longer guaranteed to last for life because investment volatility could impact growth.
  • You’re only partially protected from creditors.
  • The lump sum amount you receive requires careful asset management to ensure you have enough to live on for the rest of your life. When you are in retirement, you don’t have the luxury of riding the ups and downs of the financial market. If there is a slump in the economy, or a recession, it can greatly impact your investments which would impact how much you have to pay yourself monthly to live off of.
  • Flexibility is great, but can also be a negative. With a lot of money being accessible to suddenly spend, it can invite overspending, and once you’ve spent the money it is gone for good. A 2017 study of retirees revealed that 21% of retirement plan participants who took a lump sum depleted it in only 5.5 years on average.
  • Your health insurance coverage may be affected if you take the lump-sum payout. Some companies that continue health coverage to their retired employees stop coverage if an employee takes the lump sum payout. If this is happens to you, you’ll need to take into account the cost of paying monthly for health insurance coverage from the amount you withdraw each month from your investments.

Pros of Regular Pension Payments

A regular pension payment (also referred to as a Lifetime Monthly Benefit) is when you retire and decide to receive a set monthly payment for life. In some cases, depending on your plan, this can continue after you pass away and payments are sent monthly to your spouse until he/she passes.

  • Pension payments are made for the rest of your life, no matter how long you live, and can at times continue after death with your spouse.
  • With a regular pension check, it is harder to splurge or overspend on items that you might later regret.
  • You get guaranteed income for life.
  • Tax is spread equally over your lifetime (stable predictability)
  • No concern about running out of funds
  • No concern about investment volatility
  • Fully protected from creditors

Cons of Regular Pension Payments

  • Being 100% taxable income for your lifetime
  • You can’t adjust the pension benefit amount
  • If you and your spouse die earlier than expected, there is nothing left over that could be used as inheritance

Defined-Benefit Pension Plan Surplus Cash

Over time, depending on how the financial market and economy is doing, your company’s defined-benefit pension plan may face deficits or surpluses between the money currently in the plan and the total amount of their pension obligations. These surpluses can be of great benefit to you if you decide to move your pension via copy-cat annuity to a financial institution because it could provide you with ‘surplus cash‘ which is bonus cash given to you on top of your pension’s commuted value.

Ask your financial advisor or a retirement pension expert details about how you could receive surplus cash on your pension payout.

We can assess your commuted value and let you know about the opportunity of potential surplus cash. Click here to book a virtual meeting.

Moving Your Pension When Leaving Your Job

If you’re leaving your job or were recently terminated by your employer and your company has a pension plan, you may want to consider moving your defined-benefit or defined-contribution pension away from your employer and into a secure financial institution that your employer does not have any control over.

Do you leave the money with your current employer’s pension plan and trust them with it? Or, do you move the money out of the company pension plan.


Do nothing. Leave your pension with the company. If you do this, your retirement benefit stays locked in with the company and will continue to accumulate depending on how the company decides to invest it and how the economy and markets perform.

Ask yourself, in 30 years is the company still going to be making vehicles here in Canada and employing people to contribute to my pension? Or will the Canadian auto industry be located in Mexico? Who will be putting money into your pension so you can take it out?

If you decide to go this route, ask the pension plan administrator if there are increased administration fees, because some companies will no longer give you the discounted ‘group’ rate.


The copycat annuity (also known as a “mirror annuity”) is a popular choice for employees coming out of a defined-benefits pension plan. It allows you to receive the same pension that your employer promised you, but it gets paid out by a secure Canadian insurer instead of the company you worked for.

Sun Life, Canada Life and Desjardins will bid on your pension. The Canadian insurance company you choose will pay you the exact same pension, same bridge and the same spousal pension.

Plus, sometimes your company’s pension has a surplus and the Canadian insurance company may pay you your pension plus extra cash. We’ve seen bonus cash payouts up to $30,000. You might qualify.


Taking the cash is known as the commuted value. You’re able to move the money out of the company pension plan so it can be self-managed by you.

Your employer cuts 2 cheques to you, one is locked in pension money, the other is cash.

Watch out for the government tax grab, but beyond that, this is your money. Use it for retirement or to pay off your mortgage or buy a boat or RV. Take a trip. The rest is your estate.

Keep in mind that if you choose this option, you’ll want to make sure to contact a financial planner to help you invest your funds so that you’ll have enough money to last you for the rest of your life. We can help. Call us to speak with a pension expert at 1-888-554-6661.

There are other things to consider when moving your pension away from your employer, such as using your Locked-in Retirement Account (LIRA). Learn more here.

Taking A Company ‘Buyout Deal’

Is your company downsizing?

When an employer is downsizing or restructuring their business, the company might provide employees with an offer for a one-time amount of money if you leave your job voluntarily.

Companies call this a buyout deal.

Sometimes this ‘buyout’ deal also includes benefits such as prolonged health and oral insurance coverage.

A buyout isn’t like severance pay, which your company may need to pay you if you lose your job through no fault of your own.

Click here to learn more about how a buyout is calculated and what to look for in buyout offers.

The State Of Inflation, Interest Rates & Bond Yields in Canada

How Does Inflation Impact Your Pension?

When you’re planning for retirement, you need to take into account the impact of inflation, which is the general increase in prices and fall in the purchasing value of money.

In other words, you’ll want to think about the rising cost of consumer goods and services in Canada 10, 20, 30+ years from now when you enter retirement age.

The average rate of inflation in Canada recently has been 2% per year, which means that the cost of goods and services has been rising by 2% every year. This number is calculated by using what is called the “consumer price index” (CPI), which tracks the pricing changes of a broad range of over 600 consumer goods.

Why does this matter?

Public pensions (such as the Old Age Security (OAS) pension and Canada Pension Plan) are protected against inflation, so if the cost of living goes up, the value of benefit payments also goes up.

However, some employer pensions are not protected against inflation. You’ll want to check with your pension administrator to see if yours is or not.

Personal savings, mutual funds, and guaranteed investment certificates (GICs), are also usually not protected against inflation, which means that you’ll need those investments to grow by at least the rate of inflation, otherwise the amount of things that money can buy in the future will be less than what they can buy now (it loses buying power).

Should You Work Part-Time While In Retirement?

Many retirees plan to supplement their income with a part-time job. The decision to do so is not always an easy one, but it is one that can pay off in many ways. It’s not always about money!

Working in retirement can be a great way to stay connected with friends and family. It can also be a great way to stay mentally sharp. If you’re looking for a part-time job, look at the whole picture before deciding whether it’s right for you.

First, answer these 8 questions to help you decide if a part-time job in retirement is best for you.

Should You Retire Early (Before 65)?

Planning on an early retirement?

A risk with early retirement is that you may not have had enough time to build up the funds you’ll need during your retirement. You may need to work longer to save more money.

Typically retirees start their pensions at age 65. But what if you want to access your retirement pension funds earlier?

You may have your pension locked in with your employer as a defined-benefit pension and want to move it out of the company, or you might have your funds locked up in a “Locked-in Retirement Account” (LIRA).

Usually the only way to get your retirement funds out of your locked-in accounts is to retire or reach at least 55 years of age. You can also explore:

  • Transferring funds to a Life Annuity, a Life Income Fund (LIF), or a Life Retirement Income Fund (LRIF), depending on which province you live in.
  • Utilizing a buyout offer as an opportunity for retiring early.

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Finding A Certified Financial Planner To Help

If you’re not using a financial planner, or don’t have one, it’s time to get one. You should be talking to a financial planner on a monthly basis about your priorities and needs for the next year.

It’s important to have a financial planner who will sit down with you and create a plan that works for your specific needs.

During these difficult times with the COVID-19 pandemic, you don’t need to meet your financial planner in person. Financial planners and advisers are available to answer your questions through email, phone (1-888-554-6661) and video chat using Zoom! Technology has made it easier than ever to get the answers you need when it comes to financial planning.

The day you retire is one of the most exciting days of your life. It’s a time to relax, enjoy the fruits of your labor and explore new hobbies. But it’s also a time to be prepared.

If you’re unsure about the next steps to take for retirement, you’re wondering if you’ll have enough money when you retire, or you’re looking for information about moving your pension away from your employer, give us a call. We can help! We’ll also assist you with estate planning, address tax minimization, and answer all of your retirement questions.

Call us at 1-888-554-6661 to get started or click here to schedule a virtual Zoom meeting (video call).

Why Hire a CFP?

A Certified Financial Planner will help you identify your current financial situation and determine what is needed to reach your goals. They will help you create a budget that works for your particular needs and will assist you with creating an investment strategy that fits your personal goals. A CFP will help you develop a plan that includes all aspects of your finances including:

  • Budgeting
  • Investments
  • Retirement planning
  • Estate planning
  • Tax planning and preparation
  • Insurance planning (life, disability, health)

It is important to remember that going with a financial planner or advisor does not eliminate the risks that are an integral part of investing, but it does help you learn to calculate those risks better.

What type of Certified Financial Planner should you be looking for?

You want to have one who will listen to your concerns and help you create a plan that works specifically for you. A CFP is trained in all aspects of personal finance including investments, taxes, insurance and estate planning. A CFP will look at all aspects of your life when creating a plan for you instead of just looking at numbers on paper or computer screen like some online calculator does. What this means is that not only do they know how to make sure that each aspect of their clients’ lives are working together toward reaching their overall goal (retirement), but they also know how to adjust things if something isn’t working out the way it should be (like if you suddenly lose your job unexpectedly or are laid off because of COVID-19).

A certified financial planner has been trained on how to analyze all these factors and come up with a plan that is unique for you. They also have access to tools that can help them see what would happen if they made certain changes or took advantage of opportunities available in the market. This allows them to be able to provide more personalized advice instead of just giving general information like the calculator does.

Creating Your Family’s Financial Retirement Plan

Before meeting with a Certified Financial Planner, here are some questions you can ask yourself while in the comfort of your own home. Write down the answers in a notebook and bring them to your first meeting with your CFP. At Pension Solutions Canada, we also have a Free Estate Planning Worksheet you can download and fill out.

Be realistic and write down a list of things you want to achieve financially. If you’re having trouble coming up with goals, here are some things to consider:

  • What are your current expenses?
  • How much do you spend each month on food, clothing, housing, utilities, transportation and insurance?
  • How much do you owe on all your debts?
  • Do you have any credit card debt or loans?
  • What about mortgage payments?
  • What are your retirement goals? Do you want to buy a house, start a business or travel the country in an RV? Write down the goals that are most important to you.
  • How much would you like saved for emergencies and other short-term goals?
  • When it comes time to pass on, what would you like people to remember about you? Do you want to be known as a generous family that gave to charity, or a family that helped everyone in need? Think about what kind of legacy you want to leave behind besides financial contributions. This could be something as simple as having a beautiful garden for everyone to enjoy. Whatever it is, write it down so that you can work toward achieving it.

Also be sure to check our 20 Questions Checklist Before Retiring and our list of popular resources to help you pre-retirement.

Want a second opinion with an expert to talk to about what your retirement options could look like?

Let’s explore your retirement and pension options together.
The services we provide at Pension Solutions Canada are 100% completely no cost to you. We are an independent firm, not tied to a specific company. This means you’ll get completely honest, unbiased recommendations and a truly customized solution tailored to your plans and goals.
We work with all the major providers including Canada Life, Sun Life, and Desjardins with a focus on exceptional customer service. Making sure you can retire happy is our top priority!
We’ll assess your commuted cash value, advise you on when to start your CPP, when to start your OAS (Old Age Security), integrate your RRSP contribution room, provide you with an opinion on your pension options, and much more.

If you are planning on retiring in the next five years, you should get a plan in place. If you don’t have a plan in place, you may be looking at a disastrous situation once you reach your retirement age, or end up being forced into an early retirement due to job loss or health circumstances.

Don’t leave it up to chance!

Simply click here to schedule a 15-minute virtual consultation call with us at a time that works best for you.

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