How much money do I need to retire comfortably in Canada?
Starting a plan to retire is one of the most important financial steps you will take in your life. You might imagine a comfortable lifestyle in the future, as your reward for working at each previous stage of life.
If you are like a lot of other Canadians, you want two things – enough money saved, and a sense of certainty and peace of mind you can enjoy a comfortable lifestyle when you’re no longer working.
This guide addresses some of your most pressing questions about retirement planning in Canada.
You will want to understand the income you will need down the road at retirement, and you will want to decide when and at what age you want to retire.
Each section provides insights into the financial and emotional factors that affect your decisions while you are preparing for retirement.
This guide is designed to give you a clear, confident path forward.
In the following chapters, you’ll find strategies for creating a reliable retirement income, managing taxes after retirement, protecting your retirement savings from inflation, and making wise decisions about your home and lifestyle.
Let’s find out what it means to retire securely in Canada.
Is $2 million enough to retire in Canada? Is $1 million enough? How much is enough?
How much money do I need to retire?
This is a question I get asked most often. It is easy to understand why it is top-of-mind for Canadians at all stages of life – whether starting their saving strategy or approaching retirement very soon.
I’ll bet you hope for a simple answer.
The reality is that the amount you’ll need depends on your individual lifestyle, expected expenses, and goals. Retirement isn’t about accumulating as much as possible at the expense of everything else. Fretting about falling short is also unnecessary.
There’s a simple process to ensure your savings are adequate for a realistic and comfortable life.
As you get closer to retirement and want to determine how much you’ll need, start by assessing your monthly expenses today.
Next, when you think about your current lifestyle and budget, much of what you spend your earnings on today will no longer apply when you’re no longer working. Give serious thought to the activities central to your lifestyle today that will be necessary and part of your future way of living.
This is as simple as creating a budget for your current living scenario – except you’re predicting the costs for your future self. What expenses from your current budget need to be maintained in retirement, and which ones will no longer apply? You will immediately see today’s most costly expenses – like those related to working or parenting your school-aged will drop to zero.
Meanwhile, will you continue living in your current home, and will it be paid for? Do you plan to downsize when your kids have left home? Will you rent? Are you planning to travel?
Make a list. Determine what expenses will need to be funded from your retirement income. (idea … how to make an after-retirement budget with download)
Experts suggest aiming for around 70-80% of your pre-retirement income to maintain a similar standard of living, but this can vary. High living expenses or substantial healthcare costs may push this percentage higher. Moving to another city, country, or town may affect your housing and living costs.
Also, consider life expectancy. With Canadians living longer, you are wise to plan for a retirement that could last 25-30 years or more.
In summary, the amount you need is highly personal. It is simply a matter of organizing answers to basic questions then finding a realistic total. Focus on defining your expected expenses. Then, estimate your income requirements. Create a retirement budget that reflects your unique lifestyle. Getting this picture clear – even if it is likely to change many times - is your first step toward securing a comfortable retirement.
When should I retire?
The “right” age for retirement varies from person to person and isn’t just about reaching 65 years old.
The ideal retirement age depends on multiple factors, including your financial readiness, health, lifestyle goals, and personal preferences and desire or capacity to continue your career or start something new.
While some Canadians eagerly look forward to retiring as soon as is feasible in their 50s. Others choose their early 60s – which is most common. More often than before, people choose to work into their late 60s or even 70s for a long list of reasons. The point is: you choose. Generally, there isn’t a “required” age.
When determining your retirement age, first consider your financial situation. Do you have enough savings or – along with pension and government payments - to support your desired lifestyle without an ongoing income from work?
Another key factor is the influence your age might have on your health vitality, mental acuity, or ability to keep pace with the stress. Some people enjoy working and remain energized by the routine, while others may want to retire early to pursue personal interests, travel, or enjoy time with family.
Also, take government benefits into account. Canada Pension Plan (CPP) benefits, for example, are accessible as early as 60 but increase the longer you wait to receive them. Old Age Security (OAS) can begin at age 65 but is higher if delayed until age 70. Deciding on a retirement age means balancing the pros and cons of accessing these benefits at different times.
Ultimately, there’s no perfect retirement age. It’s about assessing your financial resources, health, and life goals to choose the right timing for you. Remember, the best retirement age is the one that aligns with your financial needs, and how you see yourself thriving.
Even though a paycheque may no longer land in your account every few weeks, retirees get paid through other means. Let’s break it down.
Yes, a stable income stream is essential for a secure retirement.
Firstly, when most people talk about “retirement planning” they’re imagining the process of planning savings that are invested to generate interest as an income. These are registered accounts, pensions, and personal investments which become an income that covers your expenses. How, when, and how much you draw from invested savings is a strategic process that impacts taxes and how long the savings last.
Secondly, retirees also rely on a combination of government benefits.
One common strategy for retirement income is the “bucket approach.” This involves dividing your assets into three categories: cash for immediate needs, medium-term investments, and long-term growth assets. The idea is to draw from the cash bucket first, allowing your other investments time to grow, and then replenish the cash bucket as needed.
Registered accounts like RRSPs (Registered Retirement Savings Plans) and TFSAs (Tax-Free Savings Accounts) can be pivotal in generating tax-efficient income. At age 71, you are required to transfer any RRSPs to RRIFs (Registered Retirement Income Funds), and a minimum withdrawal is then required each year, which is taxable. Balancing RRIF withdrawals and later TFSA withdrawals can help manage your tax burden and possibly maximize after-tax income.
Creating a reliable income stream also involves planning for longevity. A sustainable withdrawal rate, like the “4% rule,” is a common guideline where you withdraw 4% of your portfolio yearly to avoid depleting it. However, this rate can vary based on market conditions and personal needs. Setting up an income stream that reflects your financial resources and spending patterns is key to a worry-free retirement.
When planning your retirement savings, many Canadians wonder, “Where should I put my money?”
The answer depends on your goals, risk tolerance, and time horizon. Typically, most Canadians use a combination of RRSPs, TFSAs, and other investment accounts to build their nest egg.
Why RRSPs? They Reduce Taxable Income Today
RRSPs are a popular choice because contributions are tax-deductible, which reduces your taxable income today. The funds grow tax deferred until withdrawal, usually in retirement, when your tax rate may be lower.
Why TSFAs? They can Grow in value and Withdrawals are Tax-Free
TFSAs, on the other hand, allow for growth, and withdrawals are tax-free, providing flexibility in retirement. Balancing these accounts allows you to save effectively for the long term.
Why Stocks vs. Bonds? A difference in risk
For those with higher risk tolerance, some might invest in equities (stocks) for growth, while more conservative savers may prefer bonds or GICs (Guaranteed Investment Certificates). A diversified portfolio that includes both growth assets and safer investments can help weather market fluctuations and protect your savings.
Building retirement savings isn’t about finding a single “right” account. Instead, it’s about understanding how each account works and using them strategically to maximize growth while minimizing tax liability.
Key Takeaway: Taxes can take a big bite out of your retirement income if not managed carefully. Find out how to structure your withdrawals to keep more of your savings in your pocket and minimize your tax bill.
By the way, always consult a Professional Tax Advisor for your personal tax situation.
You paid taxes while you worked. And guess what? Your non-working years are also taxed. Most of our clients nearing retirement want to know every tactic available to reduce the taxes they pay, and they turn to us for support and guidance.
Taxes can have a significant impact on your retirement income, so we spend a lot of time helping clients understand the tax implications of various retirement accounts.
In Canada, retirement income from registered accounts, such as RRSPs, is taxable upon withdrawal because the contributions are tax-deductible. When you make an annual RRSP contribution, you receive a tax credit and do not pay taxes on the equivalent amount of earned income. Taxes are then deferred until any future withdrawals are made.
Why Must RRSPs Be Converted to RRIFs by Age 71?
The Canadian government allows RRSP contributions to grow tax-deferred only for a finite period. If you don’t convert your RRSP to a RRIF by the end of the year in which you turn 71, the government will deregister your RRSP, and the entire balance will be added to your taxable income for that year—potentially resulting in a large tax bill.
Don’t wait until 71 to think about how you will withdraw an income. Start planning your strategy in your 60s. Planning how and from where these withdrawals are made is essential.
How Does a RRIF change Help Your Tax Situation in Retirement?
A RRIF mandates minimum annual withdrawals, which are included in your taxable income. Funds in a RRIF continue to grow tax-deferred until withdrawn, but they come with a caveat: mandatory withdrawals.
A minimum amount must be withdrawn from RRIFs each year, starting the year after the RRIF is created. The withdrawal percentage increases as you age, reflecting a drawdown of your funds over time.
You can withdraw more than the minimum amount, but withdrawals are taxed as income. A sudden large withdrawal can push you into a higher tax bracket.
Why are TFSAs recommended for reducing Retirement Taxes?
Unlike RRSPs or RRIFs, which are taxed as income when you withdraw money, TFSA withdrawals don’t affect your taxable income. This means they won’t push you into a higher tax bracket or reduce income-tested benefits like the Old Age Security
A TFSA acts like a safety valve in retirement. If you have unexpected expenses or want to supplement your income without triggering taxes, your TFSA is there to provide flexibility. A TFSA gives you freedom—freedom to access your money when you need it and freedom from worrying about taxes when you do.
TFSAs are also a good choice for supplementary savings. Retirees should consider contributing to a TFSA. If they have unused contribution room, and they receive a lump sum from an inheritance or sell an asset while retired, you can possibly deposit that money into a TFSA to let it grow tax-free. When you withdraw it, the amount will not be counted as taxable income.
Protect Your Retirement Savings from Inflation: What can you do?
Key Takeaway: Inflation is part of every retirement plan. You can’t ignore it, but with the right strategy, you can stay ahead of it and make your money work as hard tomorrow as it does today.
Are you experiencing sticker shock each time you grab something for your shopping cart? It seems everything is priced higher than it was a year ago. Inflation is a timely news topic for this reason.
Global energy prices, supply chain dynamics and economic policies all seem to take their turns to kick you in the wallet.
When prices for goods and services rise over time, your money doesn’t stretch as far. From your morning coffee, groceries, or heating bill – each item costs more year after year.
The statistics show the truth – you’re paying more.
In Canada, the Consumer Price Index (CPI) is a measurement used to observe the change in price for a fixed basket of goods and services, reflecting the rising or falling cost of living.
In 2022 the CPI rose by 6.8%, marking the largest increase since 1982.
In 2023 the CPI increased by 3.9%
In 2024 as of October, the annual inflation rate was reported at 2.0%.
For retirement planning, the steady price increase will cause your savings to lose purchasing power. Even at a low rate, like 2% a year, inflation adds up and will significantly reduce the value of your money and what you can afford in your golden years.
What can retirees do about inflation?
Even a low inflation rate can add up when compounded over 20 or 30 years. Retirees often feel inflation most in everyday essentials like groceries, utilities, and healthcare, making it harder to justify extravagance.
How do you safeguard against inflation? Your investment advisor should help you build a portfolio that should increase over time and keep pace with inflation. Include growth-oriented investments in your portfolio, which have historically outpaced inflation over the long term. Examples include stocks and sometimes real estate.
Bonds, while more stable, may not always keep up with inflation, especially in low-interest environments. Therefore, you will want to balance the volume of bonds in your portfolio with growth assets.
Fixed-income sources, like pensions without cost-of-living adjustments, lose their value over time. Your retirement savings do not need to be a stagnant vault. Instead, continuously adjust your portfolio to ensure your retirement income maintains its value.
Should You Retire with Debt? Why a Clean Slate Matters
Key takeaway: Aim to reduce high-interest debts before you retire and maintain a clear budget to keep your spending within manageable limits.
Entering retirement with debt is simply a “no” if possible.
You’ve spent decades building savings, and the last thing you want is to see it eroded by loans, mortgages, or other debts that become harder to manage when you’re on a fixed income.
Retirement should be about peace of mind, not the stress of monthly repayments.
Here’s why debt in retirement is such a problem: When you’re no longer working, your ability to recover from financial setbacks is limited. High-interest debt—like credit cards or personal loans—can pile up quickly. It’s easy to think, “I’ll just pay it off slowly,” but every dollar spent on interest is a dollar you don’t have for travel, hobbies, or emergencies.
About Reverse Mortgages
Reverse Mortgages have advantages and disadvantages. Before considering a reverse mortgage, you should consider all other possible options available to you. Talk to an advisor who will offer advice on all options.
It’s not just your money you’re spending—it’s your future. And this could be a slippery slope that can leave you worse off than you started.
If you’re thinking about taking on debt for a renovation, a vacation, or even to help your kids, ask yourself: Is this really worth the long-term cost?
The best thing you can do is face debt head-on before you retire. Pay off high-interest loans first—credit cards especially. If you still have a mortgage, think about whether paying it down or downsizing makes more sense.
You’ve worked too hard to let debt take control of your golden years. Keep it simple, keep it secure, and focus on what truly matters: enjoying the retirement you’ve earned.
How to Avoid Debt in Retirement
In order to avoid creating debt, manage your expenses. Establish a retirement budget that covers fixed and variable expenses like housing, utilities, and insurance, while variable costs may include travel, hobbies, and dining out.
Prepare for unexpected costs also. Even in retirement, having cash readily available for unforeseen expenses—like medical bills, home repairs, or helping family members—can prevent you from needing to tap your credit cards or draw out of your investment accounts unexpectedly, which might incur losses or tax implications.
Downsizing, Relocating or Staying Put: What Makes Sense
If you’re like many retirees, your home is one of your largest financial assets—but it might also be one of your biggest expenses. Deciding whether to downsize, relocate, or stay put isn’t just a financial choice—it’s deeply personal. That’s why it’s important to weigh both the emotional and practical sides of the decision.
Downsizing: More Than Just a Financial Move
Downsizing is often marketed as the go-to solution for retirees, and for good reason—it can free up capital, lower monthly expenses, and reduce maintenance. Selling a larger home you no longer need and moving to a smaller, more efficient property might make perfect sense. But, as I often tell my clients, not all downsizing is created equal.
You need to ask yourself: How much equity can you actually free up by selling your home? Will the smaller home you’re eyeing really reduce your expenses, or is it in a high-cost area packed with luxury features? Some retirees downsize but find their new condo or townhouse still comes with hefty monthly fees or unexpected costs.
I also ask clients to consider their lifestyle. Do you still envision hosting family gatherings? Or will a more manageable home let you focus on hobbies, travel, and relaxation? Many retirees tell me that after moving to a “right-sized” home, they feel lighter—both financially and emotionally.
Relocating: A Lifestyle and Financial Decision
For others, retirement is the perfect time to relocate. Whether it’s to a retirement-friendly area with a lower cost of living or a dream destination near family, moving can stretch your retirement dollars. But relocation comes with trade-offs. Are you comfortable leaving your current community and support network? Will you really save money, or will moving expenses and rising property prices in popular retirement spots, like Kelowna or Victoria, eat into your savings?
When Staying Put Makes Sense
Sometimes, staying in your current home is the best decision. If you’re deeply rooted in your community or have a home that’s already affordable and easy to maintain, staying put may provide more stability. However, I remind clients to plan for future upkeep, property taxes, and the possibility of needing “aging-in-place” upgrades.
The Bottom Line
There’s no one-size-fits-all answer. The key is finding the choice that aligns with your financial goals and your vision for retirement. Whether you downsize, relocate, or stay put, take the time to evaluate all the financial and emotional costs so you can make the right move for you.
Avoid These Common Retirement Mistakes
Retirement may look like uncharted territory, but you can learn from those who have carved this path before you. Avoid errors that others have made so you don’t have to jeopardize your security. Here are the most frequent mistakes that have derailed retirees’ financial stability and how to avoid them.
Overspending
After decades of hard work, it’s natural to want to reward yourself in retirement. You’ve earned it, right? The challenge comes when spending outpaces your resources. Whether it’s frequent travel, dining out, or spoiling the grandkids, these costs can add up quickly.
It’s not wrong to want to enjoy your retirement. But without a realistic budget, even small overindulgences can snowball. The solution? Track your expenses for the first six months and see how they align with your income. Adjustments don’t mean sacrifice—they mean preserving your freedom later.
Retiring Too Early Without Enough Savings
Sometimes, people retire because they’re tired of their jobs or believe they can make it work. The emotional pull of finally being “free” can overshadow the financial realities. Retirement often lasts 20–30 years and leaving the workforce too soon can strain your savings.
Taking an extra year or two to save more or pay down debt can be the difference between confidence and worry. Don’t see delaying retirement as a setback—it’s an investment in your peace of mind.
Starting Unrealistic New Ventures
Retirement can feel like the perfect time to pursue a passion project or start a business to fill your days with a new and exciting challenge, but this often comes with unexpected risks.
I have known of people who pour their savings into a business idea, only to discover they underestimated the costs, time, and energy required.
The desire to stay busy and fulfilled is understandable, but before you jump in, make sure the numbers work and that the business won’t compromise your financial foundation. Consider starting with smaller, lower-risk ventures that won’t put your security on the line like part-time project work, consulting or freelancing.
Giving Too Much Away
It’s natural to want to help your kids or grandkids, but retirees often overextend themselves to provide financial support.
You can’t pour from an empty cup. If you deplete your savings to help others to a fault, you risk running out later in life.
The key is balance. Communicate openly with your family about what you can afford to give without compromising your own needs.
Setting and forgetting
Retirement isn’t static—your needs, the economy, and your lifestyle will change.
Too many people think they can set their plan once and never touch it again.
But failing to review your finances regularly can leave you unprepared for shifts like inflation or unexpected expenses.
Schedule an annual review of your finances, whether on your own or with an advisor. Small adjustments along the way can save you from big problems down the road.
Retirement isn’t about being perfect—it’s about being prepared.
You’re human and emotional.
You’re human and emotional.
The financial journey to retirement is often shaped as much by psychology as it is by numbers. Be aware of common subconscious biases that creep in and quietly nudge you toward choices that are out of step with your goals. Be fair to yourself about what may influence your thinking when anticipating the future.
Be aware of these unhelpful thoughts that can sneak up on the most rational people.
Let’s look at loss aversion. Nobody likes losing money, but focusing too much on avoiding losses can leave your savings vulnerable to inflation. You need to develop a portfolio with your advisor that fits your risk tolerances and could allow for some reasonable growth.
As I often tell clients, “Some risk is worth considering. The goal is to find a level of risk that grows your savings while still letting you sleep at night.”
Then there’s comparison bias—the trap of measuring your success by someone else’s retirement lifestyle.
Your neighbor’s vacation photos or fancy car don’t tell the full story. Their choices don’t define yours. Focus on your plan and what makes sense for you, not what others appear to have.
Herd mentality is another common pitfall. It’s easy to follow the crowd, whether it’s investing in the latest stock trend or copying someone else’s financial strategy. But what works for others might not align with your goals or risk tolerance. You need a plan built for your reality, not theirs.
Overconfidence is another common bias, where individuals may overestimate their investment knowledge or decision-making abilities. This can lead to impulsive choices, such as frequent trading or attempting to “time the market.” In retirement, such strategies can jeopardize long-term stability.
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