Planning for retirement with little or no savings to draw on

GIS is a tax-free monthly benefit payable to OAS pensioners with low incomes. Single retirees whose incomes are below $18,600 excluding OAS may receive up to $916 per month, or $10,997 per year, as of the third quarter of 2020. The maximum income and benefit for couples varies depending on whether both are receiving OAS. If both spouses are receiving the full OAS pension, their maximum combined income to qualify for GIS is $24,756 excluding OAS, and their maximum monthly benefit is $552 each ($6,620 annually). If your spouse is not receiving an OAS pension, the income limit rises to $44,592 excluding OAS, and a $916 monthly ($10,997 annual) maximum benefit applies. 

It should be noted if a GIS recipient receives any taxable income other than OAS, they will receive less than the GIS maximums above. 

If we combine these three pensions, a single retiree at age 65 who is entitled to the maximum CPP and is no longer working may receive $14,110 per year at age 65. They may also receive $7,362 per year of OAS, assuming they have been longtime or lifelong Canadian residents. They would not get the maximum GIS but would still get $2,249 per year. 

That’s $23,721 per year in total between CPP, OAS and GIS, or about $1,977 per month, with little to no tax payable depending on the retiree’s province of residence and eligible tax credits. 

Other forms of retirement income

There are a bunch of other factors involved with all three pensions, but the point is they can provide a solid foundation for a senior’s retirement income and should be evaluated individually by potential recipients. 

Other federal and provincial benefits, often tax-free, may also be payable to retirees. The Government of Canada has a Child and Family Benefits Calculator to try to estimate them. The eligibility for these benefits is generally determined by simply filing a tax return. 

What could retirement look like with $10,000, $50,000 or $100,000 in savings?

What if you have saved $10,000, $50,000, or $100,000 towards retirement to supplement your government pensions? 

At age 65, a sustainable initial annual withdrawal from your investments might range from 3% to 4% or more, depending on your investment risk tolerance, investment fees, and life expectancy. That means a saver with $10,000 could withdraw between $25 and $33 from their savings per month, or $300 to $400 per year, and increase those withdrawals by inflation each year. 

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