If you are like most Canadians, whether or not you have an employer-sponsored pension plan, you will have government pension plans and your personal savings when you retire. If you are an immigrant, you should know that the number of years you spend in Canada affects the amount of retirement income you can reasonably expect.
Introducing Charlie and Carlos. They were both born on the same day in 1980. Coincidentally, they are both software engineers and work for the same company. They were in the exact same position, received the same salary and benefits, and started working for the company on the same day in 2015. For the sake of discussion, let’s assume you both joined the company at the same time and had parallel careers. Equivalent earnings for several years prior to the current position in 2015. Over the years, their levels of savings and consumption have been similar.
Since all these conditions are equal, we assume that Charlie and Carlos receive the same retirement income from public planning and personal savings, right? Well, they don’t.
Retirement savings
Charlie was born in Grand Beaver, Saskatchewan and has lived in Canada for the rest of his life. Carlos was born in Chihuahua, Mexico. You immigrated to Canada in 2015. The table below shows the difference in retirement income if you retire at age 65 in 2045.
Generating income in retirement
Fast forward to 2045 and Charlie and Carlos will retire. With the omnipotence of the writer, I decided to live another 20 years until I was 85.
Charlie’s guaranteed income from the Government of Canada plans (OEA and CPP) is approximately 25% higher than Carlos’s guaranteed income, at $ 430 per month (2018). His personal retirement savings in Canada are almost 40% higher than Carlos’s, with a difference in the income-generating pool of almost $ 600,000. This means that there is a big difference in annual retirement income. As you may have noticed, the biggest difference is in the amount of money accumulated in individual retirement savings plans (RRSP and TFSA), not in government plans. This is something to think about.
