6 Common Myths About Retirement Planning in Canada

Retirement might be 30 years away or just around the corner, but the questions are usually the same. How much will you need? Where will the money come from? And are you doing enough today to enjoy your golden years tomorrow?

For many Canadians, the answers aren’t clear. Based on a 2026 RBC Insurance poll conducted with Ipsos, while 59% of Canadians are confident they will have enough money to cover their basic retirement needs, confidence declines significantly when it comes to maintaining their desired lifestyle in retirement (51%).

Add to this the impact of inflation on savings, expenses and purchasing power, and the uncertainty becomes even more pronounced. This lack of clarity can lead some people to rely on rough estimates, follow outdated advice, or avoid retirement planning altogether.

This article looks at six common myths and what you can think about doing for your retirement instead.

Myth 1: You need $1 million to retire comfortably in Canada

A common misconception is that you need a million bucks in the bank to retire comfortably in Canada. It’s been repeated for so long — in financial ads and casual conversations — that it’s become a magic number stuck in people’s heads.

The problem is that retirement isn’t one-size-fits-all. A single number assumes everyone has the same spending habits, housing costs, retirement goals, income sources, and financial obligations. But everyone’s situation is different.

As a rough guide, a $1 million portfolio could potentially support withdrawals of roughly $40,000 per year over a 25- to 30-year retirement, depending on market conditions, inflation, and how your investments perform. Add in government benefits or a pension, and that may be comfortable for some — but not nearly enough for others.

Chasing a figure that isn’t based on your individual circumstances can backfire. If you assume you need less than you do, you may come up short when you retire. But aiming for a number that’s far higher than necessary can be just as problematic. It might lead you to pinch pennies, live smaller, delay experiences, or make sacrifices that don’t meaningfully improve your retirement security.

Run the numbers

Rather than chasing an arbitrary retirement savings target, build one that reflects your goals and circumstances. A few common benchmarks can help you estimate whether you’re on track:

10 to 15 percent rule: Many financial advisors recommend saving roughly 10 to 15 per cent of your pre-tax income throughout your working years. Combined with investment growth and government benefits, that may provide a substantial portion of your retirement income. But the right percentage ultimately depends on factors like your retirement goals, expected expenses, income sources (like workplace pension plans), and age.

Recommended milestone age: Another way to gauge your progress is to compare your savings against age-based benchmarks. For example, that may look like:

For someone earning $75,500, those targets might look like this:

Those may seem like big numbers — but spread out over decades and supported by investment growth, it’s often more achievable than at first glance.

The goal isn’t to hit a magic number. It’s to build a retirement plan around the lifestyle you want and regularly check your progress along the way. You can test different scenarios using RBC’s online retirement savings calculators.

Myth 2: CPP will cover my retirement needs

If you’ve contributed to the Canada Pension Plan (CPP) throughout your career, it can be easy to assume those monthly payments will cover most of your retirement expenses

But CPP was never designed to be a primary retirement income source. Historically, it was intended to replace about 25 per cent of a worker’s average earnings. Government benefits provide an important foundation, but most Canadians will need personal savings to help bridge the gap.

Consider the numbers. In 2026, the maximum monthly payment amount at age 65 is about $1,508 per month. That’s a meaningful starting point, but it’s worth thinking through how it lines up with your actual expenses. Would it cover your rent or mortgage, groceries, utilities, and other day-to-day costs? For many Canadians, it covers part of the picture rather than all of it, which is why personal savings and other income sources tend to play an important role alongside these benefits.

Get the full picture of your retirement income

Your retirement income will come from multiple sources, and it helps to know what each may provide:

• Canada Pension Plan (CPP): The Canada Pension Plan (CPP) retirement pension is a monthly, taxable benefit that replaces part of your income when you retire. If you qualify, you’ll receive the CPP retirement pension for the rest of your life, but exactly how much you’ll receive in CPP pension payments is based on how much and how long you paid into the plan, and the age you start your pension. People who spent time out of the workforce, or earned lower incomes, generally receive less. Also, delaying CPP until age 70 increases your monthly benefit by 42 per cent compared to starting at age 65 — and you’ll receive that larger payment for the rest of your life.

• Old Age Security (OAS): A flat-rate government benefit that’s available from age 65 and primarily based on years of Canadian residency. If you earn a high income in retirement, some of it may get clawed back.

• The Guaranteed Income Supplement (GIS): A government benefit that tops up OAS payments for lower-income seniors.

• Personal savings: Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), workplace pensions, and other investments often make the biggest difference in determining your retirement lifestyle.

The key is understanding how these pieces fit together. The Canadian Retirement Income Calculator can help estimate your future retirement income and identify any potential shortfalls before you retire.

Myth 3: I only need an RRSP for retirement

Many Canadians consider an RRSP to be the retirement account that matters most: contribute, claim the deduction, and repeat.

It’s true that an RRSP is a powerful retirement savings tool, but it isn’t the only one worth considering.

One reason is taxes. While RRSPs can reduce your taxable income today, withdrawals from an RRSP or Registered Retirement Income Fund (RRIF) are taxed as income. A big withdrawal can also increase your taxable income enough to shrink income-tested benefits (government financial supports that scale based on your household earnings), such as OAS or GIS.

Rely solely on RRSPs and you risk missing out on the benefits of other retirement savings accounts that work differently — and sometimes better — for achieving certain goals. That’s why many retirement plans include a mix of accounts and investments. Different savings vehicles offer different tax advantages, levels of flexibility, and estate-planning benefits.

Other ways to save for retirement

Think of your RRSP as one player on a team. A few others worth considering:

• TFSAs. Contributions aren’t tax deductible, but anything you take out — including interest and investment gains — is tax-free. You can make withdrawals anytime you want, and they don’t count as income that would affect your eligibility for income-tested benefits like OAS or GIS.

• Workplace pension plans. If your employer offers a pension plan, make the most of it — especially if they match your contributions.

• Segregated funds.Offered by insurance companies, segregated funds like RBC Guaranteed Investment Funds (GIFs) let you invest in the stock and bond markets much like a mutual fund.What makes them different is their built-in guarantees. Depending on the contract, you’re guaranteed to get back 75% or 100% of the money you invested at maturity or death (minus fees and taxes), even if the value of your investments dropped. Segregated funds can be held in registered and non-registered accounts.

Myth 4: Your cost of living will be lower in retirement

Many Canadians assume they’ll spend far less once they retire. After all, commuting costs disappear, work clothes gather dust, and daily expenses should shrink. Right?

Not necessarily. While some expenses may drop after retirement, others stay the same, and some increase. Many retirees discover their spending doesn’t drop as much as they expected.

The data backs that up: According to Statistics Canada, households headed by someone age 65 or older spent an average of about $78,500 per year in 2023 — slightly more than the national household average.

The reason is simple: retirement doesn’t eliminate many of life’s biggest expenses. Housing, property taxes, utilities, groceries, insurance, and home repairs continue regardless of whether you’re working or not. Some retirees may still be carrying debt, helping family members financially, or paying more out of pocket for healthcare after losing employer benefits.

Plan a budget for retirement

Finding your individual target number — or how much money you’ll need to retire — starts with creating a retirement budget.

Begin with your current spending and pinpoint which costs will disappear once you stop working. Then consider the expenses that may stay the same — or even increase. One effective approach is to picture retirement in three stages and budget for each separately:

• The active years (roughly age 65 to 75). You’ve likely recently retired and understandably want to make the most of it. This is often the priciest stage. Travel, hobbies, entertainment, and treating loved ones can drive spending higher than expected.

• The slower years (roughly age 75 to 85). Trips and major activities may slow down, but the everyday bills still come in, think hydro, rent, or groceries.

• The later years (age 85+). Long-term care, home care, or retirement living expenses often become a bigger part of the budget. Anyone who’s helped an aging parent knows these bills can add up fast.

One more thing to consider is inflation. The gradual increase in the cost of goods and services over time. Your retirement budget should account for today’s expenses, but also for how those costs may rise over time. For instance, using an inflation rate of 3 per cent, something that costs $1,000 today could balloon to $2,094 in 25 years. As much as we’d like it to, our grocery bill won’t stay frozen at 2026 prices, so your financial plan shouldn’t either.

Myth 5: I’m too young to start planning for retirement

When retirement is decades away, it’s easy to think that saving can wait. But delaying retirement planning and saving is one of the most expensive choices you can make. Why? It largely boils down to compound growth.

Think of it like a snowball rolling downhill. It starts small, but over time, it grows larger as more snow sticks to it. Investing works the same way. Your money earns a return, and when that return is reinvested, it starts earning returns of its own. Over time, growth builds on growth, allowing your nest egg to bulk up if it stays invested for the long term.

The cost of waiting

When it comes to retirement savings, time can be just as important as the amount you contribute.

Imagine two people who invest $500 every month and earn an average annual return of 6 per cent. The difference? One starts at age 25 and the other waits until age 35. Using this RBC savings calculator, we can estimate where they might land at age 65:

• Start at 25: By age 65, they’ve contributed about $240,000 and accumulated roughly $1 million.

• Start at 35: By age 65, they’ve contributed about $180,500 and accumulated roughly $500,000.

The 25-year-old person who started 10 years earlier contributed only $60,000 more, but ended up with nearly twice as much money in retirement. That’s the power of compound growth, and why waiting can be costly.

If you’re just getting started, you can try to keep it simple:

• Open a TFSA and start saving. Even small amounts snowball over time.

• Take advantage of employer matching if it’s offered at your workplace.

• Contribute regularly to an RRSP. Automatic contributions can help make saving a habit.

• Increase your savings when your income rises. Raises, bonuses, inheritances, and other windfalls can be opportunities to boost your retirement savings without affecting your daily budget.

Myth 6: Retirement investment portfolios should always be conservative

Many people assume retirement means moving all their savings into low-risk investments, such as bonds or Guaranteed Investment Certificates (GICs), and avoiding market volatility altogether. Protecting your savings is a smart instinct, but it’s worth balancing that caution with the full picture.

Time is a key factor. Canadians are living longer, and retirement can last 25, 30, or even 35 years. Someone who retires at age 65 may need their savings to last well into their 80s or 90s. Over a stretch that long, an overly cautious portfolio may have a harder time keeping pace with inflation.

Consider a retiree earning 3 per cent annually on a GIC, while inflation is also running at 3 per cent. On paper, their savings are growing. In reality, their purchasing power is flat. Once taxes are paid on the interest earned, they may actually be losing ground.

Rethink your investment strategy

The fix isn’t to gamble. It’s to build a risk-appropriate, diversified portfolio that balances stability with growth.

For many retirees, that means keeping at least a portion of their savings invested in assets with the potential to outpace inflation. The right mix will depend on factors such as your age, spending needs, income sources, risk tolerance, and how long your money needs to last.

Insurance products may also play a role for some retirees. Depending on your financial goals, solutions such as permanent life insurance or universal life insurance can help support estate planning, tax planning, or long-term wealth transfer strategies.

Retire with security

Retirement is about more than building savings, it’s about creating confidence that your money can support the lifestyle you want in years to come.

Products such as payout annuities and segregated funds can help provide greater income certainty. A payout annuity converts a lump sum into a predictable stream of income, while segregated funds offer growth potential along with built-in guarantees that can help protect your savings. Together, they can help make retirement income more predictable and secure.

Not sure where to begin? A licensed RBC Insurance advisor can help you separate fact from fiction, nail down your goals, and create a plan tailored to your needs. To learn more about retirement solutions, including annuities and segregated funds, book a call with an advisor today.