How much money do you need to retire in Canada?

This general rule suggests that most people will need around 70% of their pre-retirement income to maintain a similar standard of living after they stop working. The assumption is that your retirement expenses will decrease due to having fewer work-related expenses, lower debt levels, etc. Of course, this rule may not apply to everyone, but it can serve as a general guideline for planning purposes. 

The 4% rule is a guideline often used in retirement planning. The rule has been around since 1994 and is accredited to Bill Bengen, a former financial advisor who claimed that you can withdraw 4% of your retirement savings each year and not run out of money for at least 30 years. In other words, if you had savings of $1 million, you could withdraw $40,000 yearly (4%) and have the funds last for several decades. 

Another way of looking at the 4% rule would be to start with your desired annual income in retirement and multiply that number by 25. The result is your required savings amount. Using the exact figures as above, you would calculate this as follows:

Desired retirement income x 25 = Required savings

$40,000 x 25 = $1,000,000

In recent years, the 4% rule has been questioned by some financial advisors¹ due to increased life expectancies, lower expected investment portfolio returns (the 4% rule is based on an assumption of a 6% to 7% annual return), and high levels of inflation in recent years. The critical thing to remember is that it’s only a guideline, and you’ll need to make your own decisions based on your situation. 

Despite recent dips due to an opioid crisis and the COVID-19 pandemic, Canadians' life expectancy has increased significantly over the past several decades.

According to United Nations data, the average Canadian born in 2025 can expect to live over 83 years. That’s up from 77 years in 1990.

But while not all Canadians will live this long, if you are reasonably healthy and have a family history of longevity, you may need to save more money to ensure you don’t run out of funds early. 

People have varying expectations when it comes to their planned retirement lifestyle. You may be perfectly happy living in a modest home with few expensive hobbies or travel plans.

If so, you can get by on a smaller income than someone who dreams of traveling the world and splurging on nice cars or vacation property. 

Unsurprisingly, where you decide to live after you retire can significantly impact how much money you will need.

That’s because living costs in expensive cities, such as Toronto or Vancouver, are much higher than in smaller cities or towns in more rural areas. For example, according to the Canadian Real Estate Association (CREA), the median price of a single detached home in the Greater Toronto Area (GTA) was over $1.2 million at the end of 2024². 

Meanwhile, the average price of homes sold in Winnipeg in November 2024 was much less, at around $374,000³. In addition to housing prices and rental costs, other expenses, such as transportation, utilities and overall lifestyle expenses, can also be higher in large urban centres.

As you determine your retirement income needs, you’ll want to consider government benefits, such as the Canada Pension Plan (CPP) and Old Age Security (OAS). While insufficient to fully cover the vast majority of Canadians’ retirement needs, they can replace some of the income you’ve earned during your working years and are a vital component of any retirement plan.

You can take your full CPP retirement benefit at age 65, though many Canadians opt for a reduced benefit as early as 60. (CPP payments decrease by 0.6% each month before age 65). You can also delay taking CPP up to age 70, increasing your monthly benefit amount by up to 42%⁴. 

The OAS benefit⁵ is an income-tested payment that provides a basic income for Canadian retirees. To be eligible, you must be a Canadian citizen or legal resident, 65 years or older, and have lived in Canada for at least 10 years since you were 18 (or 20 years if you reside outside Canada when applying for OAS). Unlike the CPP, OAS is not tied to employment, nor do you have to contribute to it during your working years. 

Inflation is an often overlooked yet critical factor in retirement planning. But the truth is, the same amount of money today will have less purchasing power in the future. For example, using an average inflation rate of 2.50%, $50,000 today will only be worth around $39,000 in 2035, or 10 years from now⁶.

For this reason, it’s important to adjust for inflation when projecting your retirement income needs. Plenty of online retirement calculators can help you do this, but you may want to consult a financial planner or other qualified retirement advisor. 

Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) are tax-efficient savings vehicles that can help you maximize your retirement savings. Contributions to an RRSP are tax-deductible, allowing you to reduce your taxable income in the year you contribute. RRSP monies grow tax-deferred until they are withdrawn, presumably at retirement, but withdrawals are considered taxable income. 

A TFSA is an all-purpose savings account, but many Canadians use it as an additional retirement savings vehicle due to its flexibility. Contributions are not tax deductible; however, your money grows tax deferred, and withdrawals are tax-free. If you’ve maximized your RRSP contributions, consider your TFSA for additional retirement savings. 

RRSP and TFSA: Quick tips

• RRSP annual contribution limit for 2025 is 18% of annual earned income, up to a maximum of $32,490. 
• TFSA contribution limit for 2025 is $7,000
• RRSPs may be the best choice for those in a high-tax bracket (at least over $70,000)
• TFSAs may be the best choice for those in lower tax brackets (under $70,000)
• You can accelerate your RRSP savings by contributing your income tax refund
• When you retire, money in an RRSP can be converted to a Retirement Income Fund (RIF). RIFs are designed to pay income to the annuitant 
• Spousal RRSPs offer a form of income splitting and may be beneficial for some couples
• You can borrow money tax-free from an RRSP under the Homebuyers Plan (HBP) and the Lifelong Learning Plan (LLP), but the funds must eventually be repaid

Many companies establish retirement savings plans for their employees and partially fund them through matching programs. For example, an employer might offer a 50% match on employee contributions up to a specific yearly limit. If you work for a company that offers such a program, take advantage of it, as you’re essentially getting free money.  

Risk is a central part of investing, and you must accept some risk to grow your money over time.

But you can reduce your risk (and potentially earn higher returns) by spreading your money across asset classes, such as stocks, bonds, exchange-traded funds (ETFs), real estate, etc.

This is known as diversification. You can also diversify by investing across different industries and geographic areas. 

High fees on products such as those actively managed mutual fund fees can eat into your investment returns, especially over the long run.

You can also pay significant fees if you pay an investment advisor to manage your portfolio.

You can accumulate a much larger retirement nest egg by choosing low-fee investments, such as index funds and ETFs. If you are working with an advisor, find out exactly how much they charge you and how it affects your net returns.

If you decide to save money by managing your own investments, there are plenty of low-cost options, including robo-advisors such as Wealthsimple or an online brokerage. 

Here are some popular platforms:

Questrade	TD Direct Investing	Moka
◦ Canada’s largest independent brokerage ◦ Commission-free stock and ETF trading ◦ Option to invest in managed portfolios through Questwealth, Questrade’s robo-advisor	◦ Canada’s largest online brokerage offers a premium trading experience ◦ Top-notch market research tools, even on its standard platform ◦ Supports fractional shares	◦ Beginner-friendly robo-advisor platform ◦ Offers a simple, flat-fee pricing model (versus charging a percentage of assets under management) ◦ Clever goal setting feature allows you to set personalized savings goals
Questrade review	TD Direct Investing review	Moka review
Visit Questrade	Visit TD Direct Investing	Visit Moka

Planning to retire at 55? If so, congratulations!

According to data from Statista⁷, the median retirement age in Canada was 64.8 years as of 2022, so you’re retiring much earlier than most Canadians. While this is a significant accomplishment, there are some important considerations you need to make. For starters, you’re retiring five years before you’re eligible to collect CPP and 10 years before you can receive OAS benefits. 

Until then, you’ll need to fund 100% of your retirement income from your own sources, such as a company pension plan, retirement savings, etc. Also, at such a young age, you may still have a mortgage or be putting kids through post-secondary education. Of course, you could pick up a side hustle or part-time job to bridge the gap, if needed. 

If retiring at 55 sounds like you, consider looking into the FIRE movement. 

You can begin collecting CPP immediately if you wait until age 60 to retire. While this can help supplement your retirement income, you will receive a reduced benefit for taking CPP before age 65, when the full benefit kicks in. You’ll need to decide if it’s better to delay collecting CPP and whether you can afford it. 

When it comes to your income needs, you’ll want to consider what lifestyle you want to have after you retire. If you have low expenses, e.g. your mortgage is paid off, and your kids are fully independent, you can likely live a modest lifestyle on 70% to 80% of your pre-retirement income. If you want to enjoy a more luxurious retirement filled with toys and travel, you may need to earn as much or more than you did while working.

While not everyone wants to wait until 65 to retire, waiting a few extra years has advantages. For starters, you can collect both CPP and OAS (if eligible) as soon as you retire, and your CPP benefit will not be reduced.

With more considerable government benefits to supplement your income, you may not need to save as much as you otherwise would have. Of course, your expected lifespan is a bit shorter at 65 than say, at 60 or 65, so there’s a better chance of your savings lasting for your full lifetime.