The amount you can save on your pension highly depends on your affordability. So when you start planning for it, think about how much you can afford. Besides this, you need to consider the time left for your retirement and also the kind of income you will require during the time period.
Keep the following things in mind when you start planning for the amount you should put into your pension every month.
Your expected time of retirement and the years left for your retirement
The amount of money, you have already saved for pension
Do you have plans to increase or decrease your pension contribution in the future?
How much do you expect your investment to increase between the present time and your retirement?
The amount your employer contribute to your pension
Government and workplace pension contributions
It is usually suggested that the amount equivalent to almost 15% of your annual income should be kept aside for your pension account. However, you need to keep in mind that not the entire amount comes from your side. If you are making contribution to your workplace pension, your employer also will add to it. According to the Auto enrollment rule, an employee has to contribute at least 5% of his earning whereas an employer has to pay at least 3% of the same.
Here, you also get the facility of government contributions in terms of tax relief. Based on your income tax bracket, the amount of your tax relief is determined. If you are a basic rate tax payer then you can get a tax top up to 25%. Higher and additional rate tax payers also have the right to claim a further 25% and 31% respectively through their self assessment tax returns.
Pension contribution limit
While deciding how much to add to your Canada pension plan, it is crucial for you to know about the pension contribution limit. This is because in case you exceed the limit, you will be charged with a hefty tax amount. For most savers, the present pension contribution is 100% of their incomes with a limit of $40,000. When it comes to very high earners like the people who earn more than $150,000 per year a new tapered pension contribution has been introduced.
Tracking your pension earning
Keeping a record of your pension savings is crucial for you to make sure that you are saving enough for retirement. Review your contribution level on a regular basis. You can also try to increase the amount following an increase in your income.
Just like any other investment, here also your capital is at risk. The value of your investment can decrease or increase and you might even get a lesser amount than your investment.
Canada's retirement system has achieved the fourth rank in the world, revealed a study that compares public and private pension systems in 11 leading countries. Even after this, it was found in a poll conducted by a major bank that 91% of Canadians have retirement worries.
Try to understand your options and start planning for your retirement as soon as possible. If you are living in Ontario, impacted by GM (or other) Oshawa layoffs you can contact Bruce Youngblud, a pension/financial advisor in southern Ontario who specializes in helping individuals prepare for retirement.