Retirement planning in Canada: A beginner’s guide for any age.


Updated on October 13, 2023.

So, you’re putting off retirement planning… or maybe you just don’t know where to start. Maybe retirement feels like such a faraway star in the galaxy of your life that it doesn’t even seem worth shooting for.

If that sounds like you, consider this:

The more time you spend planning for retirement now, the less you’ll have to think about it later — and the more you’ll benefit in your retired life.

And the best part about retirement planning?

Your retirement plan doesn’t have to look like anyone else’s. No single retirement plan works for everyone. It’s a piece of your life that’s yours to write. For now, let’s start by brainstorming.

Pro tip: if you have a partner or spouse, it’s a good idea to run through these questions with them and talk about the similarities and differences between your visions for retirement.

When will you retire?

This question, like most questions about the future, is a tough one to answer. You may retire at 65, much younger than that, or much older. Maybe you’ll retire due to a change in your personal life, finances, or the state of the economy.

Regardless, know there is no ‘perfect’ age to retire; there’s only the one that matches your own unique needs and goals. The best you can do for now is to ballpark the age at which you’d like to retire, and from there, estimate the length of time for which you’ll need retirement income.

How much will you need?

Here’s some more good news:

You might not need as much money in retirement as you do now. If you’re currently paying off a mortgage, planning a wedding, or spending money on daycare — but fast forward a few decades and your expenses might look totally different, with more money allocated toward utilities, entertainment, and travel.

At this point, you’re probably thinking, “How am I supposed to make a retirement ‘plan’ when so much of it is up in the air?”

Fair question. Let’s get into numbers.

As a general rule, you can assume you’ll need about 70% of your working income in your retirement years. And when in doubt, overestimate — not just to account for potential emergencies, but so that you have enough money in retirement to not only survive but thrive as much as possible. What might that number look like for you?

How much will you want?

Your retirement plan doesn’t have to be all necessities and emergency savings; it can include a plan for your wellness, too. This is why overestimating in your retirement plan is a solid strategy.

What hobbies do you think you’d like to take up in retirement? Remember that retirement will likely give you much more free time to contend with, which can mean getting more active, traveling often, or getting involved in your community. These activities may affect how much you spend on areas like transportation or memberships.

What will be your sources of income?

There are three main sources of income to consider when retirement planning in Canada. These income sources work together to help your retirement plan come to life.

1. Government income

Canada’s retirement income system includes Canada Pension Plan (CPP), which provides monthly payments to those who’ve contributed to the plan during their working years. It also extends to Old Age Security (OAS), a monthly benefit for Canadians who are 65+, and Guaranteed Income Supplement (GIS), which provides a monthly non-tax benefit to OAS recipients who have a low income and are living in Canada.

2. Work-related pensions

Do you contribute to a registered pension plan (RPP) or Registered Retirement Savings Plan (RRSP) through your employer? If so, you and your employer will regularly contribute money to this plan. An HR advisor or pension plan administrator at the company will be able to explain how your employer-sponsored retirement or pension plan works.

3. Personal savings or income

This income source can come in many shapes and sizes, whether it’s a TFSA or RRSP you’ve set up, income from your business, or money you’ve saved from downsizing your house.

If you’ve invested in an RRSP, keep in mind that it will automatically convert to a Registered Retirement Income Fund (RRIF) in the year you turn 71.

Who can you go to with questions?

A post like this or our retirement planning webinar can help get you thinking about your ideal retirement, but since your retirement income sources will work in coordination with each other, it’s important to speak with a wealth professional to guide you in your decision-making to best align these income streams with your retirement plan.

And now’s the time to meet with a wealth professional about your Vancity RRSP; the deadline for 2023 contributions is February 29, 2024. So, whether you have an RRSP already or would like to open one, book an appointment with us. Our wealth advisors will help you iron out a retirement plan that fits not just your needs for survival, but your goals for a fulfilled retirement.

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