Are you approaching retirement age? Be sure you have a clear understanding of your income sources and how they’ll support you during your retirement years.

In both the United States and Canada, government pension programs will likely be part of your retirement planning, alongside other sources of income such as employer pensions, retirement savings plans, and investments.

We’re going to take a deeper look at these income sources from both countries and see how you can make the most of them.

Government Pension Programs

Canada (Canada Pension Plan and Old Age Security)

In Canada, the Canada Pension Plan (CPP) and Old Age Security (OAS) are the two main government pension programs for retirees. CPP is based on your contributions during your working years, while OAS is a basic pension available to all eligible Canadians aged 65 and older.

To maximize your CPP and OAS benefits, consider these strategies:

  • Delaying benefits: Similar to Social Security in the U.S., delaying your CPP and OAS benefits can result in higher monthly payments. Some view delaying benefits as risky since you can’t predict the future.
  • Income splitting: If you’re married you can split your eligible pension income with your partner, which may reduce your tax burden.
  • Understanding eligibility requirements: Make sure you understand the eligibility criteria for CPP and OAS, including residency requirements and how to apply.

United States (Social Security)

In the United States, Social Security is the primary government pension program for retirees. Eligibility for Social Security benefits is based on your work history and contributions to the Social Security system. The amount of your benefit is calculated based on your earnings over your lifetime.

To get the most out of your Social Security benefits, consider the following strategies:

  • Delay benefits: You can choose to delay receiving Social Security benefits beyond your full retirement age (currently 66 or 67, depending on your birth year). By delaying your benefits, you can increase your monthly benefit amount. Of course, there’s an inherent risk with delaying benefits since you don’t know what the future will bring.
  • Claiming spousal benefits: If you’re married, you might be eligible for spousal benefits based on your spouse’s work record. This can be a valuable source of additional income and is worth looking into.
  • Understand taxation: Depending on your total income, your Social Security benefits may be subject to federal income tax. Understanding the tax implications can help you plan effectively. Most states don’t tax social security income.

Other Sources of Retirement Income

In addition to government pension programs, there are other sources of retirement income you may have, including:

  • Employer pensions: If you have a pension plan through your employer, make sure you understand how it works, what benefits you are entitled to, and when you can receive them.
  • Retirement savings plans: Individual Retirement Accounts (IRAs) and Registered Retirement Savings Plans (RRSPs) are tax-advantaged savings plans that can supplement your retirement income.
  • Investments: Income from investments, such as dividends, interest, real estate, and capital gains, can also provide additional income in retirement.

Maximizing Your Retirement Income

If you’re still a few years away from retiring and want to maximize your retirement income from all sources, consider these tips:

  • Start saving early: I can’t overemphasize this. The earlier you start saving for retirement, the more time your money has to grow.
  • Take advantage of employer benefits: If your employer offers a retirement savings plan or matching contributions, take full advantage of these benefits.
  • Seek professional advice: Financial advisors can be worth their weight in gold—literally! Their help is truly invaluable, and they can help you create a retirement plan tailored to your specific needs and goals.

The shift from traditional employment or business ownership to retirement income is a big change in how you get money to live on. To retire successfully, you just need to plan ahead. If possible, also have multiple other income sources. No one wants to rely solely on government programs, which are seldom enough to maintain the same lifestyle you enjoyed while working. With options like retirement accounts, your home or other investments, you can tap into them as an additional source of income when you need it most.