Average Retirement Income in Canada

In an article for Discovery Finance by Ryan Smith (May 2011), the following facts were revealed. There are about 5 million retirees in Canada. Their average income is $42,000. The net worth of these retirees averages $295,000. The average debt of these Canadians is less than $20,000 and two-thirds are debt free. 80 percent of those questioned say their standard of living is as good as or better than it was while they were working. In fact, more Canadians are opting to continue working not because they need the income to make ends meet, but rather because it is their choice. It seems that the older Canadians get, the more likely they are to be debt free. It also appears that retired Canadians are in better financial shape generally than their American counterparts. It’s impossible to check every detail above, but we can assume the estimates are reliable. The average income of Canadian retirees will fall somewhere between $40,000 and $45,000.

From what sources is this income derived?  For most people, their income after retirement comes from public and private pensions, part-time work, and savings/investments. There are two public pensions which Canadians earn. One is the OAS (Old Age Security) pension which for all current retirees begins at age 65. The average monthly amount at the end of 2011 was $508.35. If you are retired and have an annual income of more than $67,668, the government will reclaim part of your OAS payment. Should your annual income exceed $110,000, your OAS payment will be reduced to zero. This public pension is available to Canadian citizens and legal residents living in the country who have spent at least ten years in Canada after they turned 18.

The second public pension is the CPP (Canada Pension Plan). This income is for all Canadians who have worked and paid into the system through paycheque deductions. How much a recipient gets depends on how much was contributed. It also depends on when the retiree decides to receive it. It is possible to apply at age 60, but there will be a penalty. At 65, there is no penalty. If you wait till age 70 or beyond, the amount you receive will be increased. The average monthly CPP benefit in 2011 was $512.64.

The public pensions are standard for almost all Canadians. The difference in retirement income will be derived by investments and savings accounts acquired during the working years. Retirees who do contract work or work part-time will have an income to enjoy.   

Financial planners will advise workers approaching retirement to have a plan for these post-career years. However, this advice is sometimes worrisome- will there be enough money to manage? Will I be able to cover my expenses and still have a little extra? For many Canadians, planning ahead will ensure worry-free years of retirement. The public pensions and often the private pensions are indexed for cost of living increases.

It is important to keep a close watch on retirement income. If you are approaching retirement, how close will you be to the $42,000 average income mentioned above?