With the announcement of a new budget in Ottawa came the news that Canadians' retirement age would be going up, changing the way seniors across the country plan for the future.
The minimum age at which Canadians can receive Old Age Security from the government is set to rise from 65 to 67 over the next decade under new budget rules. A recent poll commissioned by BMO Retirement Institute finds nearly one third of Canadians currently aged 25 to 54 will rely solely on OAS and other public pension plans for their retirement income.
With maximum OAS benefits totaling roughly $6,500 per year, the benefit is likely not enough for most Canadians to live on, even when coupled with the Canadian Pension Plan or Quebec Pension Plan, each of which pays out a similar amount per year in retirement or survivor benefits. With that in mind, BMO offered some tips for Canadians to help with retirement planning.
"Having a retirement plan is more than making contributions to [a registered retirement savings plan] or participating in a pension plan," according to BMO. "A retirement plan is a document that can change from year to year, depending on your life circumstances."
By starting early and planning out a retirement strategy, Canadians can be sure their OAS and CPP benefits will be maximized, and any tax credit they may have earned will be applied to their retirement income and savings. Refinancing home loans to find the best mortgage rates can help pay off debts before retirement begins. The No. 1 reason Canadians give for not being able to save for retirement is debt, a BMO survey recently found.
If retirees discover their OAS and CPP payments are not enough, or they want to supplement their income for travel or other investments, they could consider a reverse mortgage. Unlike traditional mortgages, a reverse mortgage pays the homeowner, either in one lump sum or in several installments.
The amount a person can receive for their reverse mortgage varies depending on a number of factors, including the borrower's age and the location, type and appraisal value of the house. A mortgage broker can often secure up to 40 percent of the home's value for a reverse mortgage. The homeowner would retain ownership and control over the house, and not have to make any payments so long as he or she, or a spouse, lives in the residence.