If the time has come for you to rethink your retirement savings plan, here is a short glossary to help guide you through the process.

Government Programs

When you retire, your income will likely be from various sources, including government programs. This year, at age 65, in most cases, the annual income from these programs will be between $11,000 and $16,000.

To benefit from the Canada Pension Plan or the Quebec Pension Plan, depending on the province in which you work, you must make contributions based on your employment income. A pension is the basic income paid to wage earners who have contributed to these plans.

The Old Age Security pension is a monthly pension paid by Human Resources Development Canada to all Canadians when they reach age 65.

Private pension plans and RRSPs

Since government programs are intended only to cover basic needs at retirement, you will need a supplemental annual income to maintain a standard of living that is comparable to the one you have now. This additional income will be made up of money invested in private pension plans, RRSPs and personal savings.

Employer-Provided Group Pension Plans
A private pension plan is a contract between employers and their employees. They are also referred to as supplemental pension plans, employer-sponsored plans or pension funds. They can be in the form of defined contribution plans or defined benefit plans.

In the case of a defined contribution plan, the pension amount you receive will be based on the funds accumulated in your account, i.e., your own contributions, your employer's contributions, if any, and the interest credited on these contributions. The contribution amount is determined in advance and risks tied to fluctuations in returns are assumed by participants.

Most workers who belong to a private pension plan contribute to a defined benefit plan. If this is the case with you, you already know what your pension amount will be. It usually corresponds to a percentage of your salary multiplied by your years of service recognized under the plan.

RRSPs
Aside from these private plans, like most Canadians, you will probably draw part of your retirement income from a Registered Retirement Savings Plan (RRSP).

This account is made up of various tax-sheltered investment vehicles. These investments will provide taxable additional income at retirement.

Some companies also offer interesting group RRSP packages to their employees.