A practical guide to retirement planning in Canada

There’s no “right” age when it comes to retirement. Some people want to retire as soon as possible to pursue hobbies and passions, while others choose to work as long as they can.

To decide what makes sense for you, consider your health, job satisfaction, debt levels, and the sources of income available to you at retirement—including your savings—which will help fund your desired lifestyle.

Consider also what the earliest retirement age is for your workplace pension plan, and the ages at which government benefits become available. 

How much you need to retire depends on several factors, including your spending habits and the lifestyle you plan to have in retirement.

One common guideline is to assume you need 70-80% of your preretirement income annually. However, this depends on factors including your health costs, debt levels, desired lifestyle, and inflation projections.

Because everyone’s actual needs vary, it’s important to meet with an advisor who can take you through different scenarios and factor in inflation. 

You may want to consider planning for your retirement 12-18 months before your actual retirement date to allow for the paperwork and government benefits to be processed.

• Review your plan’s rules around retirement age before determining a date.
• Decide how you want to receive your retirement income. Consider Manulife’s Group Retirement Income Plan (GRIP), which offers several options for converting your plan’s registered retirement savings into income.  

Early planning can be key to making the most out of your retirement. If you’re within 5 years of retirement, consider connecting with a Manulife Advisor, who can provide support on income planning, benefits, investments, and next steps to transitioning into retirement.

Typically, people rely on a combination of income sources for retirement income, such as personal savings, employer pension plans, and government benefits.

• Government benefits include:
  • Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)
  • Old Age Security (OAS)
  • Guaranteed Income Supplement (GIS) for lower-income seniors
• Employer retirement savings plans
  • Defined contribution (DC) pension plan
  • Defined benefit (DB) pension plan
  • Other employer plans – group RRSP, DPSP, TFSA, stock plans, nonregistered plans
• Personal savings or income
  • RRSP
  • TFSA
  • Nonregistered and other savings
  • Part-time work or other income (rent, annuities, etc.)

Visit the links below for the latest rules on CPP/QPP, including when you can start receiving benefits and how much you could receive:

• About CPP
• About QPP

CPP/QPP benefits are indexed for inflation and are guaranteed for life.

If you retire earlier than you expected or if you’re suffering from an illness or disability that may reduce your life expectancy, starting payments earlier may make sense.

Old Age Security (OAS) is a monthly, government-funded pension for most Canadians aged 65 and older. It’s based on years of Canadian residency and net annual income, not employment history. OAS is adjusted quarterly for inflation, so payments keep pace with the cost of living.

Visit the Government of Canada site to find out the eligibility rules for OAS, including residency requirements, when you can start receiving it, when to apply, and how much you could get.

If your net income exceeds the threshold, either a portion or the full amount of your OAS benefit must be repaid through a recovery tax, also known as the clawback. Working with an advisor and careful income planning can help you manage this.

You may be auto-enrolled in OAS at age 65, but many people need to apply. It’s best to check your Service Canada account 6–12 months before you want payments to start. If you receive an auto-enrolment letter and want to delay your payments, you’ll need to inform Service Canada.

It’s your choice whether to continue contributing to the CPP/QPP after you turn 65. Some people choose to stop contributions to increase their take-home pay, while others continue contributing to increase future pension payments.

Contributions to these programs are mandatory until age 65 and automatically stop at age 70.

The GIS provides extra income to lower-income seniors receiving OAS. To qualify, you must meet specific criteria outlined by the Government of Canada, and your income must be under a certain threshold. You can find more details on the Government of Canada website.

RRSP withdrawals are fully taxable as income. Your withdrawal amount is subject to a withholding tax and is also added to your taxable income for that year. RRSPs must be converted to a Registered Retirement Income Fund (RRIF) by the end of the year in which you turn age 71. Income from RRIFs is treated the same as RRSP withdrawals for tax purposes.

Tax-free savings account (TFSA) withdrawals aren't considered income and are tax-free. Because they’re not considered income, they don’t affect income-tested benefits like OAS or GIS. TFSAs may often be used for flexible, tax-free spending and RRSP/RRIF for core income.

A RRIF and a LIF are both accounts from which you draw a retirement income. The money in these accounts comes from your retirement savings, such as an RRSP, or from your pension plan.

• A RRIF provides a flexible retirement income, as there’s a government-set minimum you must withdraw each year, but no maximum.
• A LIF is the equivalent of a RRIF, but for the “locked-in” money from your pension plan or other locked-in plans. It has government-set minimum and maximum withdrawal limits to help ensure the money lasts for the rest of your life. Rules vary by province.

Income paid from both RRIFs and LIFs are subject to income tax and tax withholding, with the tax withholding rates varying based on income amounts. 

An annuity is a financial product from an insurance company that provides guaranteed income for life or for a set period in exchange for a lump‑sum deposit. It can help protect against outliving savings and can offer tax advantages depending on your age and whether you buy your annuity with registered or nonregistered savings.

Annuities are offered in different forms with varying features. These are some of the most commonly available annuities:

• Joint life annuity—Guarantees lifetime payments for two people. Payments continue until the death of the surviving partner—the annuitant or their spouse. Generally, payments are reduced by a percentage when the annuitant dies first.
• Indexed annuity—Payments are indexed by a percentage or by inflation, as selected by the annuitant. Indexation applies for life but reduces the annuity amount when payments start.
• Guaranteed period—Payments are made for life, with a minimum number of years being guaranteed. If the annuitant dies before the guaranteed period ends, payments continue to the beneficiary for the remainder of the guaranteed period. Choosing a guaranteed period can provide added protection, but it may reduce the annuity’s payment amount when it starts.

It depends on your individual situation, your goals, risk tolerance, other income sources, general health, and tax situation. You could also choose a combination of options for your retirement income. 

As everyone’s situation and needs vary, it’s important to consider speaking with an advisor who can run through different options and scenarios and help you make the right decision.

Consider working with a licensed financial advisor who can tailor a retirement strategy for you and your family.

To get started, you could:

• Create a budget to estimate your expenses and spending in retirement
• Obtain your latest CPP/QPP estimate from the Service Canada/Retraite Québec portal
• Have a sense of how much OAS you're eligible for
• Gather your annual plan statements from your employer and previous employers
• Establish a retirement plan to know how much income you’ll need

Once you have an idea of how much money you have and how much you’ll need, your next step may be to:

• Plan how to withdraw from your RRIF, LIF, annuities, TFSA, and non-registered accounts
• Sequence withdrawals to minimize tax, manage OAS clawback, and sustain your portfolio. For example, depending on your situation, you may find that drawing from non-registered sources first, then your RRIF, while topping up your TFSA works best for you.

Building a retirement plan and income strategy that works for you can be complex. Working with a licensed financial professional can help you build a plan that’s right for you and your family.

How taxes are applied can differ by source of retirement income.

• CPP/QPP, OAS, employer pensions, RRIF/RRSP: withdrawals are considered taxable income.  
• TFSA: withdrawals aren't considered income and are tax-free.
• Non-registered investments:
  • Interest earned during the year is considered income, and therefore taxable.
  • Dividends earned annually are considered taxable, but their tax treatment is different from that of other income.
  • Capital gains are partially taxable, so the tax treatment is different from other income.

Note: Even though these income sources (except TFSA) are taxable, tax may not be withheld the same way from each one.

RRIF minimums are the mandatory minimum amounts you must withdraw from your RRIF each year, as set by the federal government. They’re calculated on January 1 of each year based on your age and the fair market value of the RRIF at the end of the previous year.

This is an individual decision that depends on various factors, including mortgage rates, investment returns, and your ability to continue repaying your mortgage during retirement.

According to the Government of Canada, your total monthly housing cost shouldn't be more than 39% of your gross household income.

As retirement is usually a time when gross income is lower, carrying a mortgage may put more pressure on your retirement income and limit your ability to do other things with your money.

You may want to make sure to have enough easily accessible savings and emergency funds, and to speak with a licensed financial advisor.

Generally, as people approach retirement, they shift toward a more conservative investment mix that reduces their exposure to market volatility. Consider assessing your risk tolerance, income needs, and:

• A core allocation to high-quality bonds and cash for stability
• Equities for growth and to offset inflation
• Dividend and low-volatility strategies for smoother income
• Regular rebalancing of your portfolio 

A general Rule of thumb may be to keep your annual withdrawal from your retirement savings to 4% of your account value at the start of the year.

However, this may not be the right approach for you. Markets fluctuate, and expenses can vary from year to year depending on your lifestyle, retirement plans, and the unexpected (new car, roof repairs, etc.) As people live longer, you may also need to consider when you retire and how long you’ll need your money to last.

Consider working with a licensed financial advisor to build a tailored retirement plan for you and your family with an appropriate withdrawal rate.

Even with provincial healthcare coverage, consider planning  for out-of-pocket costs for drugs (if not covered), dental care, vision care, paramedical care, and long-term care.

Consider employer retiree benefits or private health/dental insurance, and budget for increasing costs over the course of your retirement.

There are several approaches you can consider to ensure you don’t outlive your savings.

• If you’re still working, see if you can find ways to save a little extra. Even $25-50 each pay can add up over the long term, especially with compounding interest
• Depending on your situation, you may consider postponing your retirement by a few years to allow you to save more
• Downsizing to reduce annual expenses
• Delay taking CPP/QPP and OAS to get higher lifetime benefits
• Life annuities for guaranteed income to cover basic needs
• Working part-time to help supplement your retirement income and reduce the impact on your savings
• Maintain equity exposure in your investments for long-term growth
• Have a spending budget that you stick to  

Review your plan annually and make adjustments as necessary. 

If you decide to continue some form of work in retirement, here are a few things to be aware of:

• Employment income affects taxes and could trigger OAS clawback – if you plan to keep working in retirement, you may want to consider postponing collecting OAS.
• Contributions into pension plans can continue beyond age 65, if your plan rules allow it.
• You can continue TFSA contributions, subject to the CRA limit.
• You can contribute to your RRSP until December 31 of the year you turn 71 if you have the contribution room.
• Between ages 65 and 70, you can opt to continue contributing to the CPP.
• Between ages 65 and 72, you can opt to stop contributing to the QPP.
• At age 70, CPP contributions stop automatically.
• At age 72, QPP contributions stop automatically. 

Here’s a guideline to help you understand your retirement income options for your registered savings plans.

Tax-free savings accounts (TFSA) and non-registered savings accounts don't need to be converted into a retirement income plan. 

If you hold multiple registered savings accounts and don’t need income from all your savings immediately, and you're under age 71, you can convert some of your accounts into income plans and continue saving in your other accounts.

You must close your DPSPs, RRSPs and LIRAs by December 31 of the year in which you turn 71 years old. You can choose to transfer your savings in those plans into a retirement income plan, an annuity, or—in the case of unlocked money—cash.

Once assets are converted to a RRIF or LIF, you need to start drawing at least the prescribed minimum income from them before the end of the following year.

Unlocking rules for pension, LIRA (Locked-In Retirement Account), and LRSP (Locked-In Retirement Savings Plan) are applied according to the pension legislation of the province or federal jurisdiction that governed the original pension plan.

• Verify rules—Because each regulator and product has its own criteria (e.g., age, life events, small balance thresholds, financial hardship, non-residency), you must verify the specifics for your jurisdiction.
• Where to check—Refer to your provincial or federal pension regulator’s website for the most current unlocking requirements, forms, and timelines. Examples include provincial pension standards authorities or the federal Office of the Superintendent of Financial Institutions (OSFI) for federally regulated plans.
• Timelines—It can take at least 8–10 weeks for submission requests and processing, as multiple parties—such as the plan administrator, financial institution, and regulator—may need to review the documentation. The timing can increase significantly if the paperwork is incomplete or documentation is missing.
• Consider getting advice—Unlocking can have tax and retirement income implications. A qualified professional can help you identify your options and the best approach for your situation.

Retirement planning, especially when it comes to drawing from your savings to pay yourself a retirement income, requires a lot of decisions and paperwork.

In addition to determining how much you need and what your sources of retirement income will be, other things to consider is:

• Withdrawal amount:
  • How much you’ll need to support yourself or others in retirement
  • Whether to take government benefits like CPP/QPP and OAS immediately on retirement or later
  • Knowing the legislated minimum and maximum amounts that you can or must take out each year
• Withdrawal timing:
  • No withdrawal is required in the first year you open your RRIF/LIF accounts, but you can choose to take payments the year you open your account as long as you don't exceed the legislated maximum for the year.
  • You’ll be required to withdraw at least the prescribed minimum the following year after you've opened your RRIF/LIF account.
• Withdrawing strategy:
  • Are you withdrawing from your registered savings first, your non-registered savings first, or a combination?
  • Are you going to take out money from your riskiest investments first, your safest investments first, or a mix?
  • Will you take out more in the first few years of your retirement to support your interests and hobbies and then less as you get older? Or will you take out the minimum amount needed to support your life so you can leave more to your family or save for your needs in later years, such as a long-term care home?
• Withholding tax:
  • Depending on how much you’re taking out and your other sources of income, you may decide to specify how much tax you wish to have withheld.

A licensed financial advisor can help you build a retirement plan best suited to your specific situation.

There’s a lot to consider with estate planning, and it’s important to consult estate planning specialists and legal professionals who can help you ensure your plans are valid for your province and situation.

• In a will you can designate what happens to your assets, your children, and who administers your estate.
• You may want to consider a power of attorney (POA) for your finances and one for your healthcare. You may also want to name an alternate power of attorney.
• Understand what taxes may apply when you die, including deemed disposition, spousal rollovers, and how probate works.
• Name beneficiaries or successor annuitants, as applicable, for all your accounts—RRSP, RRIF, TFSA, annuity, etc.
  • RPPs, RRSP, RRIFs, and LIFs:
    • Having your spouse/common-law partner as the beneficiary on RRSPs, RPPs, RRIFs and LIFs will permit rolling over assets in these plans to your spouse free of tax.
    • Naming beneficiaries other than your spouse/common-law partner can create a disposition when you die, which is taxable as income before it can be distributed to your beneficiaries.
  • TFSAs:
    • Naming your spouse/common-law partner as a successor holder on a TFSA will allow your spouse/common-law partner to continue saving on a tax-free basis.
    • If you name beneficiaries other than your spouse/common-law partner, the TFSA account is deemed disposed of at death, and assets become non-registered. Subsequent earnings from these assets are then taxable.
• Life insurance can help provide tax-efficient, immediate liquidity for debts and final expenses, and support beneficiaries.
• Consider trusts or charitable giving if appropriate.

A will, power of attorney (POA), and beneficiaries should be reviewed periodically and after any major life event to ensure they're up to date and remain in line with your wishes.

Consider consulting with estate planning specialists and legal professionals to ensure your plans are valid for your province and situation.

You should review your retirement plan at least annually, and after major life or market changes. Review your spending, taxes, investments, and benefit elections.

Your situation is unique. A licensed financial advisor can help you build a personalized plan that continues to work for you as you move into different stages of your retirement.

Let your leader and Human Resources know you’ve selected a retirement date. HR will confirm your final pay, benefits end date, and employer pension options, which can affect when your CPP/QPP starts. Your HR Team can also provide you with information on any retiree benefits packages they may offer.

Decide what you want to do with the money in your retirement accounts. As a member of a Manulife group retirement plan, you have access to the Group Retirement Income Plan (GRIP), which offers several options for converting your registered retirement savings into income.

Connect with a Manulife advisor, who can provide support on income planning, benefits, investments, and next steps—especially helpful when transitioning into retirement.

Make sure you understand how much time the paperwork can take, so there isn’t a gap between your employment income and your retirement income.

To give you an idea, here’s an approximate timeline of how long things can take to process. Actual timing can vary based on the completeness of your application, province (for LIFs), and your financial institution.

• Canada Pension Plan (CPP): Approximately 6 months
• Old Age Security (OAS): Approximately 6 months
• Unlocking locked-in money: Not all provinces allow unlocking. For those that do allow it, the rules vary by province and depend on the reason for unlocking. It can take at least 1-3 months for your request to be processed. Delays can happen if documents or information are missing or if the regulator is backlogged.
• Converting RRSP to RRIF: Assume 2-3 months, depending on the financial institution and complexity of holdings.

Connect with a Manulife advisor who can provide support on income planning, benefits, investments, and next steps — especially helpful when transitioning into retirement.

How long your retirement income will last depends on several factors, including:

• How much you saved for retirement
• How long you need your retirement income for
• How much you're drawing from your retirement savings
• The returns on your investments

A licensed financial advisor can help you build a retirement plan best suited to you. 

If you're receiving the minimum or maximum legislated payments, these are automatically adjusted each year.

If you've requested a custom amount that’s different from the legislated minimum or maximum, you'll continue to receive that payment amount until you request a payment adjustment.

A licensed financial advisor can help you select and adjust a withdrawal plan that's best suited to your needs.