FAQ · 12 answers
Retirement planning basics: frequently asked questions
Planning for retirement starts with a few big questions: what you will spend, where the income will come from, and how long it needs to last. These answers explain the ideas behind the planner and point to the tools and guides that go further. The retirement plan tool is a good place to try your own numbers.
Questions and answers
How much do I need to retire in Canada?
There is no single number, because it depends on your spending, your public pensions, any workplace pension, your savings and how long you plan for. The how much do I need tool estimates a target from your own inputs, and how much do you need to retire explains the method.
Where does retirement income come from?
For most plans, income comes from a mix of public pensions (CPP or QPP, OAS and, at low incomes, GIS), workplace pensions, registered savings such as RRSPs, RRIFs and TFSAs, and non-registered investments. Some people add part-time work or home equity. See retirement income sources in Canada.
What does in today's dollars mean?
The planner shows amounts in today's dollars, which means future amounts are adjusted for inflation so you can compare them with prices now. A spending figure of $50,000 in today's dollars buys roughly what $50,000 buys today, even decades from now. It keeps long projections easier to read.
What inflation rate does the planner assume?
The planner's illustrations typically use 2% inflation, which matches the Bank of Canada's inflation target, the midpoint of its 1% to 3% range. Actual inflation varies from year to year. Inflation and retirement planning explains why it matters over long periods.
What investment returns does the planner use?
Illustrations on the site typically use 5% to 6% nominal before retirement and 4% to 5% during retirement, with 2% inflation. These are planning inputs for comparing scenarios, not forecasts or expected returns. You can change them to see how sensitive your plan is.
What is the 4% rule, and does it apply in Canada?
The 4% rule is a rule of thumb that starts withdrawals at 4% of savings and then adjusts for inflation. It was not designed around Canadian taxes, RRIF minimums, CPP, OAS or GIS, so it is a starting point for discussion rather than a plan. See the 4% rule in Canada.
What is a Monte Carlo simulation?
A Monte Carlo simulation runs a plan many times with different sequences of investment returns to show a range of possible outcomes instead of a single line. Results are usually summarized as the share of trials in which savings last to a chosen age. Monte Carlo retirement planning explained covers how to read the results.
What is sequence of returns risk?
It is the risk that poor investment returns early in retirement, while you are withdrawing, do lasting damage even if average returns over the whole period are reasonable. Two retirees with the same average return can end up with very different outcomes. See sequence of returns risk.
How long should a plan last?
A common approach is to test a plan to age 90 or 95 so that savings are not planned to run out while you are still alive, a concern known as longevity risk. A longer horizon means lower sustainable spending but more margin. Planning to 95 discusses the trade-off.
When can I retire?
There is no set retirement age in Canada, but several key ages shape the decision: CPP can start from 60, OAS from 65, and an RRSP must be converted by the end of the year you turn 71. The retirement timeline maps these milestones, and early retirement in Canada covers retiring sooner.
How is planning different for couples?
Couples can coordinate CPP and OAS start dates, share CPP, split eligible pension income and plan withdrawals so neither partner faces much higher tax. Survivor benefits also matter if one partner dies first. See the couples page.
What about retiring with a mortgage or debt?
Debt payments in retirement add to the income you need, and withdrawals from RRIFs to cover them are taxable. Some people pay debt down first, others keep a low-rate mortgage, and the trade-offs depend on rates, taxes and cash flow. See retiring with debt or a mortgage.
Educational estimate, not advice. Results depend on your inputs and the assumptions listed. They are not a prediction of returns or a recommendation. Check benefit amounts in your My Service Canada Account and tax details with the CRA. Read the disclaimer.