Retirement in Canada

Currently we can apply for Canada Pension at the age of 60 for a permanent reduced amount (for 2012 is 0.52% per month; for 2013 is 0.54%; for 2014 is 0.56%; for 2015 is 0.58% and for 2016 is 0.60%). From 2012 to 2016, the government will gradually change this early pension reduction from 0.5% to 0.6% per month. This means that, by 2016, if you start receiving your CPP pension at the age of 60, your pension amount will be 36% less than it would have been if you had taken it at 65.  If you were born in 1956 (you are now 57 in 2013) and want to retire at 60 (in the year 2016), your pension will be reduced 0.6% per month prior to 65. (http://www.servicecanada.gc.ca/eng/services/pensions/cpp/pdf/ISPB-348-11-10_E.pdf)

The Old Age Security (OAS) is the basic benefit that can only be applied at 65 and if you are not in Canada for 40 years, the amount will be prorated, based on the number of years you have lived in Canada. The full benefit for 2013 is $550.99 per month. If you had worked for the same long period of time and your contribution made to CPP at an average earning, your CPP could be at the maximum or about $1012.50 for 2013 rate.

When applying for OAS you also apply for the Guaranteed Income Supplement (GIS) at the same time in the same application form. It depends on your personal income of prior year (issued by Canada Revenue Agency on your income tax return) your GIS amount will be determined accordingly, this monthly non-taxable benefit can be added to your AOS pension. If you receive GIS and your spouse or your common-law partner is between 60 to 64, he or she also can receive Allowance benefit as well.

http://www.servicecanada.gc.ca/eng/services/pensions/oas/pension/index.shtml

So, if you lived your whole life and worked the same number of years with an average earning in Canada, your pension will be in good shape. The basic benefit that you and your spouse receive from Canada pension system plus some extra saving will make your living standard not far off from the living prior to retirement - it will be in the range from 50 to 70% of it. If you retire early, you only rely on pension income (including company pension benefit if you have one), so you have to use your saving until you are 65. Planning for early retirement that includes the plan for saving is the key. Again your life style will play a big role in your retirement strategy. But the possibility is real to achieve an early retirement in Canada.