Planning early helps in deciding when to retire
Ivan has just turned 36. At 18, he started as a cook in a local restaurant making minimum wage, and made contributions to CPP. His employer made equal contributions on his behalf. Three years later, he became a restaurant manager and continued to contribute to CPP for the following five years. Then he started his own business as a caterer.
As a self-employed person, Ivan doesn't participate in any employer-sponsored pension plan. He figures his current financial situation isn’t too bad, yet he has never really thought too much about retirement since it’s still a long way off.
Then, he received a Statement of Contributions (SOC) from the Canada Pension Plan in the mail which got him thinking about retirement. On his SOC, he found a Web site address and consulted the Web for more information about public pensions.
From his research, Ivan now knows that the government will provide him with a modest base -- Old Age Security (OAS) and Canada Pension Plan (CPP) -- on which to build additional income from his own savings for a secure retirement. Ivan knew that the additional private income was his responsibility, but he hadn’t realized how important it was to start planning so soon.
He now knows how flexible CPP will be in allowing him to apply for his retirement pension anytime after 60 years of age. The amount he receives will vary depending on when he chooses to retire. If he chooses to retire earlier than 65, it would be with a reduced pension; later than 65, his pension would increase. He would like to retire at 61 or 62 and is now planning ahead to have some personal savings of his own to draw upon.
Ivan has decided that even if retirement is far away, he still has time to plan. Personal savings including RRSPs will help to give him more options for deciding when to retire.
Case study summary - Planning early
- 1982 - Ivan starts work as a cook for three years
- 1985 - Ivan starts work as a restaurant manager for five years
- 1990 - Ivan starts his own catering company
- 2000 - Ivan gets SOC in the mail and realizes he needs to start saving if he is to retire early
- 2001 - Ivan starts an RRSP account at his bank