Estimating Your Retirement Income

Preparation for retirement includes estimating what your income will be – from all sources – once you retire. OMERS will provide you with a pension when you retire, but this won't be your only source of income. We can help you begin thinking about what you'll need in your life after work.

How much money will I need in retirement?

  • The short answer is to plan for a retirement where you can maintain the standard of living you've become used to in your working life.
  • Think about your lifestyle now and how you would maintain it, leaving room for maintaining and possibly replacing major items, medical expenses, travel costs, and so on.
  • Opinions vary about how much of your income you should replace in retirement. A common figure is about 70% of your gross pre-tax working income, indexed to inflation.
  • Some actuaries say even a 50% income replacement ratio works fine for many families once the children are grown and the mortgage is paid off.
  • Consider all your sources of retirement income: OMERS pension, government pensions, savings and RRSPs, other assets - all these things can add to a comfortable retirement.
  • Living costs are key. When you retire, if you have no mortgage, are no longer contributing to RRSPs or paying EI and CPP premiums, or putting kids through school, your living costs will be lower.
  • Costs associated with working should also fall, such as transportation, clothing, lunches out, and so forth. But you'll probably spend more on travel and leisure in the first 10 years after leaving work.
  • What are your retirement goals?
  • Have a good sense of the financial picture.
  • If you're working with a financial planner, make sure they understand how your pension works.
  • You also have to adjust to monthly income versus the bi-weekly income of working.

How much will my retirement income be, including my OMERS pension?

  • Think of your retirement income as three pillars: your OMERS pension, your own savings, and government benefits (CPP and OAS).
  • Account for everything that could be a source of potential income: all pensions (including OMERS) from all former employers; RRSPs, GICs and other savings; CPP and OAS; income sources such as a rental property, a mortgage, a possible inheritance, etc. If you lived and worked in another country, you may be eligible for international benefits from that country or from Canada.
  • Try OMERS Retirement Income Estimator to give you an idea of what your OMERS pension may be. You'll need your OMERS Pension Report or simply estimate the required information.
  • You can use this printable version of a worksheet to compare your estimated net income before and after retirement PDF File (7.53 KB).
  • Or if you're planning to retire within the next few years, complete this Form 190 - Request for a Pension Estimate PDF File (21.1 KB) to get an idea of how much your OMERS pension might be. Be sure to sign the completed form and send it to:

    One University Avenue
    Suite 400
    Toronto ON
    M5J 2P1

    Fax: 416-369-9704
    Toll-free Fax: 1-877-369-9704 .

How is my OMERS pension protected against inflation?

  • Inflation is the percentage increase in the cost of living from year to year.
  • Over time, inflation erodes the purchasing power of money. Without a fully indexed pension, you would pay tomorrow's prices with today's dollars.
  • Your OMERS pension is fully indexed to inflation, to a maximum of 6% per year. (If inflation is greater than 6%, the excess is carried over into subsequent years.)
  • This guaranteed indexing means inflation will not erode your purchasing power over the life of your pension.

More information on inflation protection
Inflation calculator

Should I contribute to an RRSP or pay off the mortgage by the same amount?

  • No one answer suits everyone.
  • RRSPs have to eventually be cashed in and taxed as income, but gains in the value of a principal residence are not taxable.
  • If you make an RRSP contribution, you can maximize the benefit of both options by using your tax refund to pay down on your mortgage.

RRSPs and tax issues

  • The immediate tax saving and tax-free growth offered by RRSPs makes them a great choice for most of us. But keep in mind that the taxes are simply deferred and eventually have to be paid.
  • You must start withdrawing money from your RRSP at age 71. That money is considered taxable income in the year it's withdrawn. Keep an eye on your total income: if you also have income from a pension, an inheritance or a business, you could end up owing taxes.

What should I do about health benefits?

  • Medical costs can be a major expense in retirement, especially for long-term health care costs above and beyond what the public system pays for.
  • OMERS only provides pensions, and does not offer health care benefits to retired members. However, at retirement, OMERS will provide some information from organizations that offer health care benefits.
  • Before you retire, find out what your employer offers in the way of health benefits to retired employees. Or whether your spouse has medical coverage.
  • You could also check organizations that offer health benefits (e.g. Municipal Retirees Organization Ontario)

How much retirement income can I expect from the Canada Pension Plan (CPP) and Old Age Security (OAS)?

  • Information about CPP
  • Information about OAS
  • If you are retiring before age 65, consider applying for your CPP benefit, which you start at age 60 at a reduced amount. Doing so might help you avoid a reduction in your CPP as a result of years of non-contributions.
  • Some estimates are that CPP/OAS benefits will account for roughly 30% of your retirement income, if you've worked in Canada most of your life.
  • You can try the government's own retirement benefit calculator
  • CPP and OAS benefits are indexed to inflation.
  • OMERS Retirement Income Estimator can also estimate how much you will receive from CPP.

Your house as a source of income

  • If you're age 62 or older, you might look at a reverse mortgage, a special type of loan from the Canadian Home Income Plan (CHIP) that converts the equity of your home into cash. You essentially borrow against the appraised value of your home. The principal and interest are paid when you either move out or die.