Defined Benefit Plans

If you are working for the government, banks or utility companies, you would probably have defined benefit contribution plan. If you have defined benefit plan, make sure that you do not over contribute to your RRSP as any over contribution to the RRSP above the limit will incur a 1% penalty per month. The biggest advantage of this plan is that your retirement pension amount is guaranteed which is based on your years of service and the amount of your salary.

Defined Contribution Plans

Most of companies either have a defined contribution plans or registered retirement savings group plans. In the case of defined contribution plan, you can choose how much you want to contribute to the plan subject to plan restrictions. You can take advantage of this plan where your company will contribute match up to a certain amount you contribute. As these are similar to individual RRSP plans, your retirement pension is not guaranteed.

 Non-Registered Investments

If you have extra funds available you have to determine what kind of investment you want to choose. Most go to a bank and open a GIC (guaranteed investment certificate), however GICS earn barely minimum return and it may not even cover the inflation rate. You could choose a variety of investment including real estate, stocks, mutual funds, bonds etc.

If you are in the lower income category and if you have funds available (example: funds were available by inheritance) you could choose to have non-registered investment. If you borrow to invest, the borrowing costs are deductible.

You are encouraged to discuss your retirement and investment plans with your tax accountant to determine the mix of plans, the contribution amounts you should have in each plan to have a comfortable retirement.