Retirement Planning in Canada: Step-by-Step

Canadian retirement planning rests on three pillars: government benefits (CPP and OAS), employer pensions, and personal savings (RRSP, TFSA, non-registered). The first step is calculating your desired retirement income. A common benchmark is 70% of your pre-retirement gross income, though the actual number depends on your lifestyle, whether your mortgage will be paid off, and your health care needs.

Start by estimating your government benefits. CPP provides a maximum monthly payment of approximately $1,507.65 at age 65 (2026), though the average payment is about $815. OAS provides up to $742.31 per month for those who have lived in Canada for at least 40 years after age 18. Together, these form a baseline of about $18,500 per year — enough to cover basic needs but likely far short of your retirement goal.

The gap between your government benefits and your income target must be filled by personal and employer savings. Use the 4% rule as a starting point: multiply your annual income gap by 25 to estimate the nest egg required. For example, if you need $60,000 per year and government benefits provide $18,500, your gap is $41,500 — requiring approximately $1,037,500 in savings at retirement. Work backwards from your target retirement age to determine how much you need to save monthly, factoring in investment returns and inflation.

Review your plan annually and adjust for life changes — job changes, raises, children, home purchases, and market performance. Consider working with a fee-only financial planner for a comprehensive review every 3-5 years. The earlier you start, the more time compound growth has to work in your favour. Even $200 per month starting at age 25 can grow to over $350,000 by age 65 at a 6% average return.