Retirement Calculator: How Much Do You Need to Retire in Canada
- The inflation rates translate the desired retirement budget and income into retirement age dollars.
- The effect of inflation on retirement is not reflected.
- Required contributions will grow at the same rate as income.
- Saving contributions cease at retirement.
- All investments are assumed to grow at the same rate into retirement.
- CPP and OAS benefits start at the selected retirement age.
- OAS clawback rules are not considered.
- Your post-retirement income starts at retirement.
- Taxes are not factored. You can use your TFSA account to avoid paying taxes on your investment returns and your RRSP account to transfer some income from your high-income to your low-income years.
- Your desired budget stays constant during retirement.
Retirement Savings
As of January 2024, 15% of seniors were in the Canadian workforce. Compare this with 6% in January 1976. Better health is undoubtedly one reason for this jump, but some seniors have to work to cover their financial necessities. By planning for your retirement, you can enjoy later years stress-free without worrying about money. Whatever lifestyle you choose in retirement, you can set a savings goal. In recent times, when a higher inflation rate has led to the BoC raising its overnight rate, there have been following increases in mortgage rates, and it’s been difficult to save a lot. Our Canada Retirement Calculator is a specialized investment calculator that can help you determine how much you need to save for your retirement to help with financial planning.
There are different tax shelters that you can use to pay less tax on the money you set aside for your retirement. These include Registered Retirement Savings Plan (RRSP) and Tax-free Savings Account (TFSA). Other than these, you can also obtain benefits from the government during retirement, such as the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and the Old Age Security (OAS).
Registered Retirement Savings Plan
You can contribute to an RRSP account until the age of 71, after which you must withdraw the entire amount and convert it to an RRIF (Registered Retirement Income Fund) or purchase a stream of future cash flows called an annuity. You can withdraw from an RRSP at any time but you’ll have to pay tax on the withdrawals. Your financial institution will withhold a minimum amount called a withholding tax. If this is not enough to cover the taxes you owe based on your tax bracket, then you will have to meet the additional tax liability. The only exceptions are borrowing from your RRSP to buy your first home using the Home Buyers Plan (HBP) or going back to school with the Lifelong Learning Plan (LPP).
Tax-Free Savings Accounts
Another popular retirement savings vehicle is the TFSA, which allows your investments to grow tax-free. Anyone who has reached the age of majority in their province of residence can open a TFSA account.
- 2009-2012 - $5,000
- 2013 & 2014 - $5,500
- 2015 - $10,000
- 2016-2018 - $5,500
- 2019-2022 - $6,000
- 2023 - $6,500
The TFSA contribution room is indexed linked to inflation, and rounded off to the nearest $500. The TFSA contribution room is also rolled over each year so you can carry over any unused element of your contribution room to the following year.
Withdrawals from TFSA are not taxable however, you get back that contribution room only on the first day of the following year. You can calculate your TFSA Contribution Room using WOWA’s TFSA calculator.
Non-Registered Accounts
The growth in savings in non-registered accounts is taxable—compare this with the savings in RRSP and TFSA accounts. Interest earned on non-registered accounts is included in your income and subject to income tax, like your regular income. However, dividends are taxed at a lower rate. Our Income Tax Calculator can help you work out the taxes you will pay on your income and investments.
Even though non-registered accounts don’t offer tax benefits like registered accounts, they don’t have their restrictions. You can open a non-registered investment account with a brokerage and start investing in stocks, Exchange Traded Funds (ETFs), Guaranteed Investment Certificates (GICs), and more.
Benefits Offered by the Canadian Government in Retirement
The standard age for starting the CPP is 65. The earliest you can receive CPP payments is 60, and you can choose to defer payments until you are 70. The payment amount increases for each month you defer. Alongside the CPP payment, you may also qualify for other CPP benefits such as Disability Pension, Survivor’s Pension, Death Benefit, etc.
You can use WOWA’s CPP calculator to work out the approximate monthly CPP benefit you could receive. Residents of Quebec are eligible for the Quebec Pension Plan (QPP) instead of the CPP.
Old Age Security is a monthly benefit available to seniors 65 or older. Primarily, you are enrolled automatically; however, some people may need to apply to Service Canada. Just like CPP, you can choose to defer payments and receive a higher pension amount for each month that you defer until the age of 75.
Eligibility for Old Age Security and the payment amount depends on your income and the length of time you have lived in Canada or a country with a social security arrangement with Canada after reaching age 18. Estimate how much you could receive here with the Old Age Security calculator.
Disclaimer:
- Any analysis or commentary reflects the opinions of https://thelocalbroker.ca/ analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
- The calculators and content on this page are for general information only. https://thelocalbroker.ca/ does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
- Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.