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Your Retirement Income Plan (Canada)

What you'll spend in a year, minus what CPP and Old Age Security already send you, is the number your whole plan runs on.

By Nate Sorensen Reviewed for accuracyUpdated Oct 202611 min read
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You've got money in a few accounts and a date in mind. A retirement income plan is the answer to one question: how does that money reach your bank account every month once the pay stops? It starts with a subtraction. Take what you expect to spend in a year, then take away what the government and any workplace pension already send you. What's left is what your own savings have to cover. The rest of the plan is choosing which account each payment comes out of, and when.

Key takeaways

  • Your whole plan runs on one number: what you'll spend in a year, minus what reaches you without your help. Your savings pay the rest.
  • Work out your spending, not a share of your old pay. You compare what you spend now with what you think you'll spend once you've stopped.
  • Your public pensions will pay you less than you'd guess. The average new Canada Pension Plan cheque at 65 is a bit over half the maximum, and you need close to a full working life of contributions to get near that maximum.
  • What you take out of a Registered Retirement Income Fund, or RRIF, is taxable and counts against your Old Age Security. What you take out of a Tax-Free Savings Account, or TFSA, counts against nothing.
  • You get one fixed date. Your Registered Retirement Savings Plan, or RRSP, has to become income by December 31 of the year you turn 71.

The part you don't have to arrange

Before you work out what your savings have to do, count what reaches you whether you plan or not.

The Canada Pension Plan, or CPP, pays you on the strength of what you earned and how long you paid in. The standard age is 65. Start at 60 instead and you give up 0.6% for each month you go early, so starting at 60 leaves you 36% lower for good.1 Hold off past 65 and it grows 0.7% a month, topping out 42% higher if you wait until 70.1 Start at 65 and you're joining people who averaged $877.01 a month in April 2026.2 You could get as much as $1,507.65,2 but that needs a working life of close to full contributions behind it, and most people plan on the average unless they know theirs runs higher.

Old Age Security, or OAS, doesn't ask what you earned. It goes on the number of years you've lived in Canada, it can start at 65, and it lifts by 10% for good once you turn 75.3 The amount changes every three months. Your figure's in your Service Canada account, which is the one place it's ever right.

Three more payments go with it, all income-tested, and you'll only see them if your income's low enough. The Guaranteed Income Supplement, or GIS, tops you up, it isn't taxed, and they recalculate it each July from what you made last year.3 The Allowance does the same job for you between 60 and 64 if your spouse or partner already gets that supplement. And if your spouse or partner has passed away, the Allowance for the Survivor can pay you between 60 and 64, more per month than any of the other three.3

If you've got a pension at work, add it in. Where yours promises a set amount for life, your annual statement carries the figure, and two things on it are worth a look: whether the payment rises with inflation, and whether it changes once your CPP starts. Nobody can work either out from the outside. They're on your statement.

What your own savings have to cover

Now do the subtraction. Compare what you spend today with what you'll spend once you've stopped, and adjust the lines that move.12 Commuting and work clothes fall away. Travel and hobbies often climb.

Say you land on $52,000 a year before tax, and your OAS plus an average CPP come to somewhere near $19,500 of it. Your savings have to find the other $32,500, which works out at about $2,700 a month. Treat those as round illustrative figures rather than a forecast, but the shape holds: most of what you live on comes out of accounts you own.

What your savings are actually being asked to do
Where a year of retirement spending comes fromA single horizontal bar representing fifty-two thousand dollars of yearly spending, split into three parts. Old Age Security is the smallest part at about nine thousand dollars, an average Canada Pension Plan is a little larger at about ten thousand five hundred, and the remaining and much longer part, about thirty-two thousand five hundred dollars, is what your own savings have to pay out. The savings part is drawn in gold because it is the part the plan is really about. All three figures are illustrative and rounded.What you want to spend in a year$52,000Old Age Securityabout $9,000CPPabout $10,500What your savings pay youabout $32,500, or $2,700 a monthIllustrative and rounded. Old Age Security resets every three months.
Illustrative. A single person wanting $52,000 a year, with Old Age Security and an average CPP rounded to the nearest $500. Your own three numbers will differ.
Source Illustrative. Old Age Security and CPP rounded to the nearest $500; CPP average at 65 from source 2. Old Age Security amounts change quarterly (source 3).

If that number looks big the first time you write it down, that's the ordinary reaction. It's also the only part you can still move, by spending a little less, working a little longer, or starting the public pensions later than you'd planned.

Then there's how long your money has to keep going. Reach 65 in Canada and you're joining a group that averages about 21 more years.4 That's an average across everyone who gets there rather than a number for you, and plenty of people are still drawing on their savings at 90.

You'll also see this side of it squashed into a single savings target, usually by multiplying your yearly shortfall by 25, or by taking 4% out in year one. Both are the same rule of thumb out of American research. It's illustrative, and it'll give you a rough size rather than an answer to what you take out in any given year. "When Can I Retire?" works through the sizing question in full.

Which account should you take money from first?

There's no single order that suits everyone, and the reason is that your three kinds of account behave differently once money leaves them. Draw from an RRSP or RRIF and it lands as taxable income for that year, lifting the income your OAS gets tested against. Draw from a TFSA and nothing about it counts as income. There's no tax, and it does nothing to Employment Insurance, to the GIS, or to your OAS.5 Draw from a regular investment account and only the growth gets taxed, but that growth still counts against you.

What each account does to the rest of your plan
How the three kinds of account behave when you withdrawA grid of nine squares, three account types across and three questions down. Money you take from an RRSP or RRIF is fully taxable, counts against the Old Age Security and Guaranteed Income Supplement tests, and can be split with a spouse once you are sixty-five. Money you take from a TFSA is not taxable, does not count against those tests, and there is nothing to split. Money you take from a regular investment account is taxable on the growth only, does count against the tests, and cannot be split. The TFSA square on the middle row is drawn in gold with a heavy dashed border, because it is the only withdrawal that leaves a government payment entirely alone.RRSP or RRIFTFSARegular accountTaxed when youtake it out?Yes, all of itNoThe growth onlyCounts against yourpension top-ups?YesNoYesCan you split it with aspouse from 65?Yes, a RRIF canNothing to splitNo"Pension top-ups" means Old Age Security and the Guaranteed Income Supplement.
The gold square is the one withdrawal that leaves a government payment alone. A TFSA earns its place late in a plan for that reason, not early.
Source TFSA row: CRA, What is a TFSA (source 5). Splitting row: CRA, Pension income splitting (source 10).

So that same $2,700 a month costs you a different amount depending on where it comes from. You and a neighbour could hold identical savings and end up with different Old Age Security, purely because of which account each of you emptied first.

When do you have to turn your RRSP into income?

By December 31 of the year you turn 71. You've got three choices at that point: move the money into a RRIF, buy an annuity with it, or take the cash and pay tax on all of it in one year.6 Nobody withholds tax when you transfer it straight across into a RRIF,6 which is why that's the route most people take before drawing from it.

Your RRIF then comes with a minimum. Nothing's due in the year you set it up, but from the next year on your carrier works the payment out from what you held at the start of that year, at a percentage set by your age, and that percentage climbs every year.7 You're free to take more than the minimum, and never less.8

That start-of-year valuation is fixed once your carrier takes it. If your investments drop in February, your minimum doesn't drop with them. The RRIF guide has the percentage for every age, and what each one comes to in dollars.

The dates your plan has to work around
Four ages that shape a Canadian retirement income planA timeline running from age sixty to age seventy-two. At sixty, your Canada Pension Plan can start, permanently reduced. At sixty-five, your Old Age Security can start, and your RRIF income becomes eligible for splitting with a spouse and for the pension income amount. At seventy-one, your RRSP has to become a RRIF, an annuity or cash by December 31. At seventy-two, your first minimum RRIF payment is due. The first two ages are choices; the last two are deadlines and are marked in gold.60Your CPP can start, permanently smaller71Your RRSP has to become a RRIF, anannuity or cash, by December 3165Your OAS can start. Your RRIF incomecan be split, and earns the pension amount.72Your first minimum RRIF payment is due
Only the last two are deadlines. The first two are choices, and most of the planning happens between 65 and 71.
Source Ages and adjustments: Service Canada (sources 1 and 3). Conversion deadline and first minimum: CRA (sources 6 and 8). Splitting and the pension amount at 65: CRA (source 10).

What the tax system can take back

Earn enough and you hand part of your OAS back. They test you on line 23400 of your return, the one they label net income before adjustments, and if yours came to more than $93,454 in 2025 then each dollar over that line shaves 15 cents off the pension.9 Say your income lands at $105,000. You'd hand back $1,731.90 across the year that follows.9 Keep going and there's no payment left.

The biggest change you can make to that number is splitting income with your spouse or partner. Once you're 65 you can shift as much as half your eligible pension income, which includes your RRIF and annuity payments, onto their return on form T1032,10 which lowers the income they test you on, and lowers your OAS repayment with it.10 You can't do the same with your OAS or your CPP, though.10

Having pension income at all earns you a small credit. You claim the lesser of $2,000 and your eligible pension income on line 31400, and your RRIF payments count toward it once you're 65.10 That's why you'll see people move part of an RRSP across into a RRIF at 65 rather than waiting for 71.

Drop far enough down the income range and the arithmetic works the other way round. If you're low enough to receive the GIS, one extra dollar out of your RRIF can cut a payment you were never taxed on, so it costs you the tax and part of the supplement at once. Take that dollar out of your TFSA and neither happens.5

Two more things move your answer, and neither's got anything to do with your accounts. Your province sets its own tax rates and credits on top of the federal ones, so the same accounts one province over would leave you with a different amount. And if you worked in Quebec, your public pension is the Québec Pension Plan rather than CPP, and it's Retraite Québec you deal with.11

See what your own gap looks like

Your subtraction's a good deal more useful with your own figures in it. Run your own numbers with your yearly spending, the other income you're counting on, and a withdrawal rate you pick, and it shows what your savings are left to cover.

Where these plans usually land

If you've got a pension that pays for life, most people in your position leave CPP and OAS alone and spend their planning on the RRSP or RRIF, because that's the piece where the timing is genuinely theirs.

Without one, the pattern runs the other way. People draw from an RRSP or RRIF earlier than they expected to, often before their CPP starts, to bring down a balance that gets paid out later at a higher percentage whether they want it or not.

Near the OAS line, the acting happens years ahead, since the repayment gets calculated from a year that has already finished by the time anyone mentions it.

And if you qualify for the GIS, most of this runs backwards for you, because one taxable dollar takes tax and part of a supplement with it.

Your pension statement, your last account statements and last year's notice of assessment have all three numbers on them. When to start CPP and the Old Age Security clawback each go a lot deeper, and you'll find the rest of the retirement guides alongside them.

?

Common questions

Do I have to start CPP and Old Age Security at the same time?

No. They're separate programs with separate rules. You can start your CPP any time from 60 to 70, and your Old Age Security from 65, so plenty of people take one before the other.

Can I split CPP with my spouse on my tax return?

No. Pension income splitting covers your RRIF and annuity income once you're 65, and it specifically doesn't cover your CPP or your Old Age Security.

What if I don't need the RRIF minimum?

You still have to take it out, but you don't have to spend it. Once you've handled the tax you can move it into your TFSA if you've got room, or into a regular investment account.

Does a workplace pension change how much I need saved?

Yes, and usually by a lot, because it comes off the same subtraction as your CPP and your Old Age Security. Every dollar it pays you is a dollar your own savings don't have to. You'll find the size of it on your annual statement.

Is it better to take money from a TFSA or a RRIF?

It depends on what your income looks like that year. Your RRIF payment is taxable and counts toward the OAS test, and your TFSA withdrawal is neither. If you've got room under the threshold, plenty of people take the RRIF money anyway, to stop the balance growing into a bigger required payment later.

Does where I live change any of this?

The federal parts work the same wherever you are. Your province adds its own tax rates and credits, and if you worked in Quebec your public pension is the Québec Pension Plan rather than CPP.

Further reading

  • Never Too Lateby Gail Vaz-Oxlade🍁 Canadian

    Written for people who think they have left it too long, and built on the argument that there is no single number everyone has to hit. It is from 2010, revised 2013, so read it for the thinking and take every current figure from your own statement.

Sources

  1. Service CanadaWhen to start your retirement pension: the standard age of 65, the 60 to 70 window, the 0.6% monthly reduction to a maximum of 36%, and the 0.7% monthly increase to 42%. Accessed 2026-09-04.
  2. Service CanadaCanada Pension Plan monthly payment amounts: $877.01 average for new beneficiaries at 65 (April 2026) and $1,507.65 maximum (2026). Both figures are refreshed regularly. Accessed 2026-09-04.
  3. Service CanadaOld Age Security payment amounts: the permanent 10% increase at 75, the Guaranteed Income Supplement and its July recalculation, the Allowance, and the Allowance for the Survivor, which carries the highest maximum of the four. Every amount is reviewed each January, April, July and October, so this page is the only current source for them. Accessed 2026-09-04.
  4. Statistics CanadaTable 13-10-0114-01, life expectancy at age 65: 20.85 further years for both sexes (19.43 men, 22.15 women), reference period 2022. An average across a population, not a personal forecast. Accessed 2026-09-04.
  5. CRAWhat is a TFSA: income earned inside and money taken out have no effect on federal income-tested benefits, and the page names Old Age Security, the Guaranteed Income Supplement and Employment Insurance. Accessed 2026-09-04.
  6. CRAReceiving income from an RRSP: the three options up to the end of the year you turn 71, and no tax withheld on a direct transfer into a RRIF. Accessed 2026-09-04.
  7. CRAMinimum amount from a RRIF: the payment is the value held at the start of the year multiplied by a prescribed factor, payable every year after the one in which the RRIF is set up. The factor at 71 is 0.0528, and below 71 it is 1 divided by (90 minus your age). Accessed 2026-09-04.
  8. CRAReceiving income from a RRIF: the minimum starts the year after the RRIF is established, is based on your age at the beginning of each year, and you can withdraw more but not less than it. Accessed 2026-09-04.
  9. Service CanadaRepayment of Old Age Security pension: the test is net income before adjustments, line 23400, over $93,454 for 2025, with 15% of the excess repaid over the following July to June period. The repayment is entered on lines 23500 and 42200. Accessed 2026-09-04.
  10. CRAPension income splitting: up to 50% of eligible pension income on Form T1032, with RRIF and annuity income eligible where the transferring spouse or partner is 65 or older at year end; Old Age Security and CPP are not eligible; and the pension income amount is the lesser of $2,000 and eligible pension income on line 31400. The page names the repayment of Old Age Security among the things the election affects. Accessed 2026-09-04.
  11. Service CanadaCanada Pension Plan, do you qualify: the CPP and the Québec Pension Plan work together, and Retraite Québec is the contact for anyone who worked only in Quebec, or worked in Quebec and elsewhere and lives there. Accessed 2026-09-04.
  12. FCACPlanning and saving for retirement: the method is to compare what you spend now against what you expect to spend then, adjusted for the expenses that change. Accessed 2026-09-04.

Educational, not financial advice. Figures verified against primary sources on the date shown.

See it in a story: "The Question That Keeps Her Up," where thirty years of paying in runs into nobody having taught her how to take it out, and "Counting What's Already There," where the yearly number gets worked out off real statements.

Related guide

When Can I Retire? How to Know If You Have Enough (Canada)