You've likely heard retirement advice your whole life, and now you're wondering how much of it is practical for you. Traditional advice suggests that you can live on about 70% of your pre-retirement income after retiring. But how can that be the case, when costs don’t stop in retirement? And just how fast does 70% of your income go if you’re not used to living off of it? 

Saving for retirement today is definitely a challenge for today’s retirees: 

• 12% of Baby Boomers have adult children living at home.
• 62% of Baby Boomers can’t save for retirement because they are supporting adult children.
• Those who are preparing for retirement themselves spend an estimated annual $33B caring for aging parents in Canada.
• 34% of Canadian retirees over 55 hold some debt, including mortgages.
• Purchasing power is dwindling thanks to rising interest rates and inflation.

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But even in light of these statistics, your outlook on retirement shouldn’t be all doom and gloom. In fact, there’s there’s a lot of fun to be had with all your new-found time off. Retirement means more leisure time, and you’ll want to fill that time with hobbies, travel and entertainment.  

However, there's one problem: those activities and adventures cost money. So how can you ensure your income will carry you through? 

 

Leverage pension, benefits and tax credits 

Pre-retirement, your income is largely determined by your salary. While tax credits and other supports might not be entirely enough, help from the Canadian Pension Plan, Old Age Security and post-retirement tax breaks can pad out your retirement nest egg.


Let’s look at a 50-year-old Canadian prospective retiree who currently makes $80,000 and wants to maintain the standard of living they have enjoyed even after retiring. Here’s what they would consider: 

 

Expected retirement age	65
Average life expectancy	83
Current value of RRSP	$300,000
Monthly RRSP contributions to age 65	$800
Expected annual RRSP rate of return	7% (6% after retirement)
Annual RRSP income in retirement	$53,291
Current value of TFSA/additional savings	$100,000
Monthly savings contributions to age 65	$0
Expected annual savings rate of return	5% (4% after retirement)
Additional income	$0
Additional annual income in retirement	$8,039
Monthly workplace pension payments	$0
Monthly Canadian Pension Plan (CPP) payments*	$800
Annual pension income	$9,600
Old Age Security (OAS)	$8,492
Total estimated retirement income	$79,421

*CPP payments will vary based on individual contributions over the past 40 years. As of 2023, the average monthly CPP payment is $772.71.

In this case, our retiree—like 62% of Canadians—has no workplace pension. Based on these calculations, their post-retirement income from RRSP and savings is just over $61,000. With CPP and OAS, the total is just shy of this $80,000 goal. 

After age 75, OAS increases to $9,341, raising the total income to $80,270.

Want to see what your retirement income amount looks like? Try our retirement planner to determine how much you'll need to save to retire your way.