Although planning for retirement can seem insignificant, especially to young adults, you can never start planning for the future too soon. It is especially important to protect yourself and your family when you retire, or in case of death or disability. Retirement funds and pension plans in Quebec can be organized by you in three different ways: the Quebec Pension Plan (RRQ), Supplemental Pension Plans (SPPs), and Private Savings (RRSP).
The Pensions in Quebec
To be eligible for the Quebec Pension Plan, one must earn more than $3,500 annually and be older than age 18 years. Payments made to the Quebec Pension Plan by workers and employers in Quebec are collected by Revenue Quebec, and the Caisse de depot et placement du Quebec is in charge of their administration. Currently, the rate for contributions to the Quebec Pensions Plan is 10.35% and is based on earnings from $3,500 to $52,500.
Supplemental Pensions in Quebec
Supplemental Pension Plans are contracts for employers and employees (alone or together), who contribute to a pension plan of which they are members. This plan acts as a “top off” for the income one will receive from the public Quebec Pension Plan. The two main supplemental pension plans are
- Defined Benefit Plans: your pension is related to the cost of living, and calculated by a formula. For example, it could be calculated by per cent of salary multiplied by years of service. The formula differs depending on employer.
- Defined Contribution Plans: from four per cent to six per cent of your salary is contributed to the plan. Also included is the predetermined amount your employer will contribute to the plan.
- Registered Retirement Savings Plan (RRSP): this is a great option if you want to begin saving for retirement at a young age. It offers benefits such as tax-free accumulation of dividends, personal gain and interest. You should convert this RRSP to a Registered Retirement Income Fund (RRIF) by the December 31, the year you turn age 71 to prevent the government from collecting taxes accumulated over your years of investing in the RRSP.
- Registered Retirement Income Fund (RRIF): with tax-free investments, and excellent flexibility, this is another great option for generating retirement income.
However you choose to plan for retirement, we here at Settle-in.com wish you all the best!
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