The main consequences of a postponement of your pension

Les principales conséquences d’un report de votre retraite

With everything that is happening, you may be wondering how to improve your retirement plan.

This project, which was to deplete your capital to 80 years of age, and then for the rest, you say ” come what may “, only inspires you more confidence.

What to do to straighten the bar ?

There are not 36 solutions. For the most part, it has only two levers to operate : the savings rate and the retirement age.

How to encrypt it ?

The C. D. Howe Institute has attempted to answer this question in a general way. He has recently published the results of a research that shows the effect of the extension of the quarry on the pension income among workers who contribute to a pension plan to a defined contribution pension (increasingly the norm). These plans do not guarantee the amount of the pension, as from personal savings in a registered retirement savings Plan (RRSP).

What makes the original study is that it shows what it would have been necessary to save more, from the age of 30 years, to retire a year early without compromising their lifestyle.

The researchers agree, such results are only possible by simplifying the reality.

They have had to rely on assumptions that do not reflect the situation of each individual and are based on income before taxes (it fills our needs and of the net revenue).

The 10% of salary

The authors of the research have been used as a starting point in a continuous saving of 10 % of the gross salary in a pension plan after 30 years.

At the end of the career, they convert the money saved in life annuities, before tax.

They are based on a rate of inflation of 2%, and yields savings of 5 %.

The results take account of the public pension schemes.

It is here a question of the Pension of the old age security, OAS, as well as the equivalent of the Quebec pension Plan, the QPP, in the rest of Canada.

The pensions of these public schemes are enhanced to life for every year that one postpones retirement.

A few observations and a conclusion

  • In 2019, a worker who earned $ 50,000 per year and whose 10% of salary was saved will from the age of 65 with a gross income equivalent to 71 % of his income, career, for the duration of his retirement.
  • If he wanted to retire at 64 years of age with the same income, he would have to save 11.5% a year instead of 10 %.
  • The one-year deferral of the pension compensates a lot the lack of savings during the active period.
  • Our conclusion : if you approach the end of your career, your plan for the rest of you seems to be fragile, delaying your retirement by a few years can make a huge difference on the rest of your life.
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