How Much Money Do You Need to Retire in Canada?

Retirement anxiety is real — and widespread. According to the 2025 CPP Investments Retirement Survey, nearly six out of ten (59 per cent) Canadians worry they’ll outlive their savings. That’s a lot of people lying awake at night, doing mental math and asking questions like, “How much do I need to retire? Is $1 million enough to retire?”

Here’s the kicker: more than half of non-retirees don’t have a financial plan. No plan means no clarity — and that can turn “enough” into this big, intimidating number that may feel impossible to reach.

So, where do you begin if you’re feeling behind? Not with guesswork. Not with a national average. You start by getting specific — taking a clear-eyed look at what retirement will actually cost you, based on your lifestyle, expenses, and income sources.

If you’re wondering “How much money do I need to retire in Canada?” this article walks you through how to figure it out. We’ll also cover practical ways to help close the income gap, including how savings tools like segregated funds can play a role in protecting what you’ve built, even if you started later than planned.

Whether you’re 35 years old and retirement feels distant, or 55 and it’s coming into focus fast, one thing holds true: the sooner you plan, the more control you gain — and the quieter that inner noise will eventually get.

Do you need a million dollars to retire?

Many people believe they need a million dollars saved to retire comfortably. It’s a popular benchmark repeated so often, it starts to feel like a magic number that everyone should aim for. But is it true?

It depends. For some, a million dollar nest egg is more than enough. For others, it will fall considerably short of what they need.

For example, a $1 million portfolio could support roughly $40,000 a year in income over a 25- to 30-year retirement, depending on market conditions and how your investments perform. If you also receive $25,000 from CPP, OAS, or a workplace pension, that gives you about $65,000 a year to live on.

The reality is, your number is personal. It’s largely shaped by your lifestyle, expenses, income, and even where you live.

When do you want to retire?

Start with a simple question: when do you want to stop working?

For some, that’s a hard exit at 60 or 65. For others, it’s a gradual shift — part-time work, consulting, or something more flexible. There’s no single “right” age, but your choice has real financial consequences.

The earlier you retire, the longer your savings need to last and the more money you’ll need. Retire later, and you shorten that timeline while giving your savings more time to grow. A practical way to think about it is this:

Retirement age = when your savings can cover your expenses without full-time work.

Canadians, on average, are retiring later than they used to, with many leaving the workforce closer to age 65 than in previous decades, according to Statistics Canada. Some choose to keep working for the extra earnings, structure, social connection, or sense of purpose. Others delay because they need more time to save, still carry debt, or support family members.

Government benefits also factor into the timing. You can begin your Canada Pension Plan (CPP) as early as age 60 or as late as age 70. If you take it before age 65, your payments are permanently reduced — by up to 36 per cent less at age 60. Delay past 65, and payments increase — by up to 42 per cent at age 70.

Old Age Security (OAS) works similarly. You can begin receiving it at age 65, or defer it to as late as age 70 for a higher monthly amount — up to 36 per cent at age 70.

Then there’s longevity — the wildcard many people underestimate. Canadians who reach age 65 today can expect to live, on average, at least another 20 years, and many will live into their 90s.  That means your retirement savings may need to last 25 to 30 years (or longer!).

Of course, no one has a crystal ball to know exactly how long they will live. In most cases, however, a retirement income plan should extend for about 30 years or more to reduce the risk of outliving your savings.

Determine your expenses

Before you can determine how much you need to save for retirement, you need to know what you’ll spend in retirement.

Here’s the reality: retirement doesn’t automatically mean lower expenses. Some costs will drop (like the costs of commuting and dining out), but others (like groceries) will stay the same or even increase. And over time, inflation will push most of those costs higher.

Start by reviewing your current budget and focusing on a few key areas:

Housing

Where will you live? If you plan to downsize or relocate, how will that change your costs? Will you still have a mortgage? Even if your mortgage is paid off, property taxes, home insurance, and maintenance costs don’t go away — and they tend to rise over time.

It’s also worth thinking ahead to later stages of retirement. Private, non-subsidized retirement homes can cost anywhere from $2,500 to $7,000 per month — and that often doesn’t include additional services like nursing care, meals, or housekeeping.

Lifestyle and travel

What does your retirement actually look like? Frequent travel, hobbies, or dining out can add up quickly. The budget for someone who takes two international trips a year and plays golf three times a week will be very different from someone who loves weekend drives and cooking at home. Neither is wrong. But you need to know which retirement you’re planning for.

Day-to-day expenses and healthcare

Groceries, utilities, and other expenses don’t disappear — and inflation can drive costs higher. If you don’t have employer health benefits in retirement, you’ll need to budget for out-of-pocket costs like prescriptions, vision, or dental care. Health expenses often increase as you age, and long-term care can be significant.

Working part-time

Earning income in retirement isn’t cost-free. It could push you into a higher tax bracket, or reduce government benefits like OAS if your income exceeds the threshold. Run the numbers carefully to understand what you’ll actually take home after tax.

Family obligations

Will you help adult children with a home purchase? Support grandchildren’s education? Assist aging parents with care? If so, build those costs into your plan — and remember these needs may change over time.

Other forms of debt

List any outstanding debt — credit cards, loans, lines of credit — and consider what will still be there in retirement. Carrying debt in retirement can limit flexibility and add stress. If possible, aim to reduce or eliminate debt before you retire, particularly high-interest debt.

Just remember: your retirement budget isn’t a one-and-done exercise. Review it regularly and adjust for inflation, changing interest rates, and shifts in your lifestyle.

What are your sources of retirement income?

The next step to determine how much you need to retire is to take stock of where your money will come from. Common sources of retirement income include:

Government programs

CPP and OAS form the foundation of retirement income for many Canadians. Depending on your income, you may also be eligible for the Guaranteed Income Supplement (GIS). Log into My Service Canada Account to find out what you might expect to receive.

Employer pensions

Workplace pension plans are designed to provide income in retirement, often with contributions from both you and your employer. Some plans offer a predictable monthly income for life (defined benefit), while others build a pool of savings you’ll draw from in retirement (defined contribution). Review your plan details or latest statement to understand what you’ve accumulated and what kind of income it could provide.

RRSPs and TFSAs

Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) are key savings vehicles for many Canadians. RRSP contributions are tax-deductible, but withdrawals are taxed as income in retirement. TFSAs, on the other hand, are funded with after-tax dollars, but withdrawals are tax-free. Using both strategically can help manage your tax liability and create more flexible income in retirement.

Other savings and investments

This can include non-registered accounts, guaranteed investment certificates (GICs), insurance annuities, and rental income from real estate.

Business proceeds

If you own a business, its eventual sale or wind-down may form part of your retirement income.

Home equity

For homeowners, downsizing or taking out a reverse mortgage can help unlock home equity to use as your income stream.

How to calculate your retirement income

Once you’ve pinpointed your income sources, the next step is to estimate how much income they might generate in retirement. Online calculators can help project this, but there are also two common methods that provide a quick starting point:

The 70 per cent rule

This guideline suggests you may need roughly 70 per cent of your pre-retirement income to maintain a similar lifestyle.

For example, if you earn $100,000 annually before retiring, you might aim for about $70,000 a year in retirement income (roughly $5,833 a month before taxes). The logic is that some costs decrease in retirement — you’re no longer saving for retirement, commuting, or paying other work-related expenses. In some cases, your mortgage may also be paid off.

That said, this is a broad estimate. Depending on your lifestyle, your target could be closer to 60 per cent or as high as 80 per cent. Where you live also matters: your dollar may stretch further in places like Manitoba and parts of the Maritimes — the provinces with the lowest cost of living —while the everyday expenses tend to bite the hardest in British Columbia, Ontario, and Alberta.

The four per cent rule

This approach estimates how much income your savings can support. It suggests youmay be able to withdraw about 4 per cent of your investment portfolio in your first year of retirement, and then adjust that amount each year for inflation — with the goal of making your savings last around 30 years.  

This rule applies only to your personal savings, and doesn’t include income from pensions or government benefits. That math on $1 million in retirement savings works like this:

• In year one, you withdraw 4 per cent ($40,000).

• In year two, if inflation is 2 per cent, you increase the previous year’s withdrawal by 2 per cent ($40,000 x 1.02) to $40,800.

• In year three, if inflation is 3 per cent, your withdrawal increases by 3 per cent to $42,024 ($40,800 x 1.03).

While your withdrawals increase, your remaining investments continue to grow and help support future income.  

You can also use this approach in reverse to estimate how much you may need to save by dividing the annual income you need by 4 per cent.

For example, if you need $80,000 per year in retirement and expect $15,000 from CPP and OAS, you’ll need to cover a $65,000 annual gap. Dividing that by 4 per cent suggests you’d need about $1.625 million in savings.

Just remember these methods are based on assumptions about market returns and inflation. They’re best used as a guideline — not a guarantee. You can also use tools like the Government of Canada’s Canadian Retirement Income Calculator to estimate your income, how much government benefits may cover, and how much your savings may need to provide.

Strategies to reach your retirement goal

There’s no single path to a secure retirement. But there are effective strategies that can make a meaningful difference, no matter where you’re starting from.

Start early and automate

The most powerful tool in retirement planning is time. With compound interest, your money earns returns — and then those returns generate returns of their own. The longer your money sits invested, the more that snowball effect works in your favour.

Automating your contributions can help make saving consistent and remove the temptation to spend first. And if you come into extra money — an annual bonus, tax refund, or inheritance — consider putting a chunk of it toward your investments.

Use your RRSP and TFSA contribution room

Using both accounts strategically can help improve your after-tax income in retirement. RRSP contributions reduce your taxable income in the year you make them, potentially reducing your tax bill. TFSA contributions don’t provide a tax deduction, but withdrawals are tax-free and don’t affect income-tested benefits like OAS. That last point matters because RRSP withdrawals are taxed as income and can trigger OAS clawbacks at higher income levels.

If your income is higher now, it may make sense to focus on maxing out your RRSP contribution room. But if your income is lower — or you want more flexibility later — focusing on your TFSA can be a smart move.

Diversify your investments and shift as you age

Don’t put all your eggs in one basket. Spreading your investments across asset classes — stocks, bonds, real estate, cash — helps manage risk. When you’re younger, you have time to ride out market fluctuations, so holding more stocks can make sense. As you get closer to retirement, you have less time to recover from a bad market year, so gradually shifting toward more stable investments — like bonds, GICs, segregated funds, or other insurance products — can help protect what you’ve built.

How segregated funds can help you reach your retirement goals

As retirement gets closer, it’s natural to want to reduce risk and protect your savings. But playing it too safe can limit growth and make it harder to reach your retirement goals.  

Segregated funds can help strike that balance. Also known as seg funds or guaranteed investment funds (GIFs), these investment products are sold by insurance companies and are similar to mutual funds — money is pooled and invested across stocks, bonds, and other assets.

But there’s one important difference: segregated funds are insurance contracts, and offer protections and unique benefits that mutual funds don’t:

Protection if markets drop

Segregated funds typically guarantee you’ll get back a percentage — usually 75 to 100 per cent — of your investment at maturity (often 10 years or more). If your investment performs well, you benefit from the growth. If not, the guarantee can help protect a portion of your investment, provided that you hold the fund until maturity.

They also offer a death benefit guarantee. If you die before the maturity date, your named beneficiaries receive either the market value or the guaranteed amount, whichever is higher.

Estate planning advantages

Because segregated funds are insurance contracts, you can name a beneficiary. This allows the investment to pass directly to your beneficiaries, bypassing the estate — which can help avoid probate fees and delays.

Potential creditor protection

In certain situations, segregated funds may be protected from creditors, which can be valuable for business owners or self-employed individuals. This protection depends on factors such as how the policy is structured and who is named as beneficiary.

Lock in your gains

Some contracts allow you to “reset” your guarantee if your investment grows. This can lock in a higher protected value, although it may extend the maturity period.

There are trade-offs to consider. Segregated funds usually have higher fees than mutual funds, reflecting the cost of the guarantees and insurance features. Whether they’re appropriate depends on your goals, timeline, and risk tolerance.

Putting it all together

Retirement doesn’t come with a universal price tag. How much you’ll need to live well — and enjoy your freedom — depends on your lifestyle, spending, and how long you’ll be retired.

What does hold true is this: the earlier you start planning, the more options you have and the less uncertainty you’ll face. You don’t need a perfect plan — just a solid one that you can revisit and adjust as your life changes.

A licensed RBC Insurance advisor can help walk you through the options, explain the costs, and determine what make sense for your situation. Book a call.