Piecing Together your Retirement Income

Posted 27 Aug 2015 by Rick Irwin, CFP, CLU


One of the most important jobs of financial advisors is to help clients plan for a secure, fulfilling retirement.  This involves looking at desired lifestyle spending (discretionary and non-discretionary) and the available resources to finance this income stream. The three building blocks here are personal savings, employer-sponsored pensions (for many) and government pensions; Canada Pension Plan (CPP) and Old Age Security (OAS).

For Canadians who are fortunate enough to retire early (pre 65) with a defined benefit pension plan (one that is based on salary levels and not based on market performance) the pension plan will usually include some form of “bridging benefit” pre 65. The intent of the bridge benefit is to equalize the pension income in those years to the income you will receive by age 65 (normal CPP age) between CPP and the pension. At age 65 the bridge benefit stops and, assuming the individual had chosen to take their CPP early, combined pension income will drop by the difference between the bridge benefit (which is based on normal CPP) and early CPP. At the same time, OAS will start at around this same time frame so the combined impact is usually an upward adjustment of a few hundred dollars.         

The following is an example of a not atypical scenario of someone who retires early, with a pension, and has financed their personal retirement funds primarily through RSPs.  

Sources of Retirement Income:
Age 55-60:
  • Pension income, including bridging benefit.
  • Drawing on personal retirement savings on a discretionary basis  
Age 60-65:
  • Pension income, including bridging benefit
  • Early CPP
  • Drawing on personal retirement savings on a discretionary basis  
Age 65/67-71:
  • Pension income (bridging benefit ends)
  • Early CPP
  • OAS
  • Drawing on personal retirement savings on a discretionary basis
Age 72 +
  • Pension income
  • CPP
  • OAS
  • Drawing on personal retirement savings on a mandatory basis (RRIF minimums)

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