Retirement may feel like it is far in the future for some of us, but it is something that is financially important for all of us. Whether you are a young adult just starting out in your career in Canada, or you are closer to retirement age, understanding how the Canadian government helps you save for retirement should be something that all Canadians are aware of. It is important to know which options will help you save and plan for a financially stable retirement.
The Canada Pension Plan (CPP)
The CPP provides Canadian citizens with a secure retirement benefit – one that is provided by the Government of Canada. CPP contributions are shared between employee and employer; both must contribute to CPP every month in order to receive this benefit. Generally, if you are employed or self-employed and make more than $3,500 a year, you must contribute to the CPP. The money you contribute is then invested into a separate fund from that of the government, and it is this fund that provides you with your retirement benefit.
Employee Pension Plans (EPPs)
Employee Pension Plans (EPPs) are also a great way for Canadians to save for retirement. These plans are offered by employers and are based on contributions from employers and employees. They are designed to provide employees with confidential retirement savings, and some employers may even match part of employee contributions up to a certain limit. This is a great incentive to ensure that employees are saving for retirement and is a benefit that employers should consider offering to employees.
RRSPs
The Registered Retirement Savings Plan (RRSP) is a retirement savings plan that is available to Canadian residents. It is designed to help employees save for retirement by providing tax advantages on the money saved or invested. It is an individual plan which means that the employee can contribute to their own RRSP and receive deductions on their income tax for amounts contributed. Not only can Canadians use their RRSP to save for retirement, but they can also use it to save for other expenses such as education costs for children or a down payment for a home.
Tax Free Savings Accounts (TFSAs)
TFSAs were introduced by the government in 2009, and they are another way for Canadians to save for retirement, with added tax advantages. They are an individual plan where contributions and earnings from investments are non-taxable. This means that Canadians can save money in a TFSA without worrying about any tax deductions when it comes to withdrawing the money. Although the amount one can contribute to a TFSA is limited to $6,000 per year, Canadians can use the money saved for a variety of expenses in retirement. This is a great way for Canadians to ensure that they are saving for retirement without facing the added taxes of an RRSP.
Workplace Pensions
Workplace pensions are another way that employers can help their employees save for retirement. These plans are similar to those of the EPPs, but they typically offer a more generous portion of the employee’s contributions. They are a great way to ensure that employees are saving for retirement and may even be beneficial for employers to offer in order to attract potential employees.
Saving for retirement is an important aspect for all Canadians, and the Government of Canada offers several options which can help employees save for retirement. Whether it is through the CPP, EPPs, RRSPs, TFSAs, or workplace pensions, Canadians have a wide range of options to help them plan and save for retirement. Knowing and understanding all of the tools that are available can help individuals in Canada save and plan for a financially secure retirement.