Why do I need to replace only 70% of my employment income to maintain my standard of living after I retire?
The percentage takes into account that your expenses will generally be lower during retirement. For example, you will no longer contribute to your private pension plan or the Québec Pension Plan. Also, your income tax, transportation and clothing expenses should decrease. But be careful, you should expect a major increase in your health and leisure expenses.
What is an RRSP?
A registered retirement savings plan (RRSP) is an individual savings plan registered with the Canada Revenue Agency. It allows you to save tax-free. Contributions to an RRSP are tax deductible, but withdrawals are taxable income.
To determine the maximum amount you can invest, refer to your Notice of Assessment from the Canada Revenue Agency.
What is a TFSA?
A tax-free savings account (TFSA) is an account registered with the Canada Revenue Agency that lets you save tax free. Any investment income generated (interest, dividends, capital gains) is not taxable, even when the accumulated sums are withdrawn from the account.
In 2010, any Canadian resident age 18 or over can invest up to 5 000 $ yearly in a TFSA. For more information, contact a financial institution that offers a TFSA..