More and more Canadians worry that they will continue working and never officially retire. According to data published for Canada 150 celebrations, about half of Canadians who are working past the age of 60 choose to do so - but the other half must continue to work to meet their essential expenses. And in the 2019 Sun Life Barometer survey, 47% of working Canadians of all ages believe they are at risk of outliving their retirement savings.
Retirement Income in Canada
Canada's retirement income system has three pillars:
- the Canada Pension Plan (CPP), to which you have directly contributed while working;
- universal government benefits to seniors, such as the Old Age Security (OAS) program;
- private pension plans and savings, which include employer-sponsored pensions and personal savings.
According to 2016 census data, seniors without this 3rd pillar - private retirement income to supplement government programs - are the most likely to continue working past age 65. However, if you do work past the age when you are eligible to receive CPP and OAS it can have an impact on your income from those sources.
If you continue to work while receiving CPP payments between the ages of 60 and 65, you must still contribute to the CPP. Those contributions will go toward post-retirement benefits and will increase your retirement income when you stop working. If you are still working between the ages of 65 and 70, you can choose not to make any more CPP contributions.
You may still receive OAS payments even if you're still working, but if you earn a high income from work after you turn 65 years old you may need to pay back some of that pension through the OAS recovery tax.
How Can My Home Help My Retirement Income?
For most Canadians, your home is the most expensive purchase you will ever make and it's where a lot of your equity has built over the years. There are a few ways you can unlock that equity to help supplement your retirement income.
Down-sizing or right-sizing by selling your home and using the proceeds from the sale to fund a more modest property, with the remainder adding to your retirement fund, may seem like the most straightforward way to benefit from your equity. However, many people have no desire to move away from their friends and neighbourhood.
A Home Equity Line of Credit (HELOC) will allow you access to funds as you need them. You will need to make payments on any money that has been received through the HELOC, but this may make sense in some situations.
A Reverse Mortgage provides options to access your funds: a lump sum, monthly installments, or initial + periodic advances. You will not be required to make any payments for as long as you or your spouse live in the home, and over 99% of homeowners have money left over when their reverse mortgage is repaid.
Of course, the best solution for you may be a combination of strategies. That's why the Auxilium Team takes a wholistic approach to your finances and consults on multiple products. Whether you're looking to start retirement savings or you want to see how your home can boost your existing retirement income, we're here to assist you. Start your free consultation with a phone call: 250-590-6520 or toll-free 1-855-590-6520. We welcome walk-ins at our 307 Goldstream office and can also arrange appointments evenings or weekends to work with you.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.
This post reflects the best available information at the time of writing/last update. In order to ensure that you have the most up-to-date information, contact us to confirm the details for your specific situation.
Originally posted June 2015
Updated January 2020