Tony has worked for the same company since he was 20. He wants to estimate what he’ll get from his defined contribution pension.
To keep it simple, let’s say:
- He made $35,000 every year
- His company contributes $1,050 every year for his pension (3% of his income)
- He retires at age 65
- The money in his plan grows 7% every year.
Tony will have $298,987 when he retires.
The result: Tony will have $298,987 in his pension plan at age 65. That will give him an income of $22,800 a year, or a monthly pension of about $1,900, before taxes. That’s a lot less than his normal income. But Tony could also top it up with his own personal savings.
Note: The example above is for simple illustration only. It does not reflect any tax savings or the impact of inflation or salary increases on contributions. Actual investment earnings may be more or less than the rates shown here.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca
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