Making your retirement savings plan

Topic: Retirement · Part 6 of 13 · 🔴 Advanced

In one sentence

A retirement plan is four numbers: when you want to retire, how much you will need each year, how much the government and your workplace will pay, and how much you must save to fill the gap.

Words to know

Retirement income need: how much money you expect to spend each year once you stop working.
Government benefits: CPP (Canada Pension Plan) and OAS (Old Age Security), the main public pensions.
Gap: the part of your yearly need that pensions don’t cover. Your savings must fill it.
Inflation: prices going up over time, so the same dollar buys less later.
Today’s dollars: doing all the math in current prices, to keep it simple.

Step 1: Pick a target age and a yearly income need

Choose the age you hope to stop working. Many people use 65, but any age can work. You can change it later.

Next, estimate your yearly spending in retirement. Start with what you spend today. Then think about what will change:

Costs that may go down: work travel, saving for a home, raising children, a mortgage that is paid off.
Costs that may go up: health care not covered by your province, travel, help at home.
Use today’s prices. It is easier, and the government pensions rise with inflation anyway.

Step 2: Estimate your government benefits

The Canadian Retirement Income Calculator on canada.ca estimates your CPP and OAS. It can also include workplace pensions, RRSPs, TFSAs and foreign pensions. It takes about 30 minutes.

Have these ready:

Your CPP Statement of Contributions, from your My Service Canada Account.
Your history of where you lived. OAS depends on your years in Canada after age 18.
Statements from any workplace pension, RRSP or TFSA.

For immigrants, OAS is often a partial amount. It is based on years in Canada after 18, divided by 40. If you have a spouse or partner, each of you should use the calculator, then compare. The results are estimates, not promises.

Step 3: Calculate your gap

Take your yearly need. Subtract your yearly CPP, OAS and workplace pension. What is left is your gap.

Then multiply the gap by the number of years you expect to be retired. This shows roughly how much savings you need. It is a simple estimate, not an exact answer.

Step 4: Choose which accounts to use

You can save for retirement in several accounts. Each has pros and cons.

Workplace plan with a match: employer money is added when you save. Getting the full match is often the first step for people who have one.
RRSP: you get a tax deduction now and pay tax when you take money out. It often fits people in a higher tax bracket today. The 2026 maximum is $33,810, but your own room is on your Notice of Assessment.
TFSA: no tax deduction now, but growth and withdrawals are tax-free. The 2026 limit is $7,000. It often fits people with lower income today, or who may need the money sooner.
Non-registered account: for extra savings after the other accounts are full. Growth is taxed.

For more on choosing, see RRSP vs TFSA: which one first?

Step 5: Automate and review every year

Set up an automatic transfer on payday. Saving first is easier than saving what’s left.
When you get a raise, increase your saving a little.
Once a year, maybe at tax time, redo the calculator and update your plan.
Review after big life changes: a new job, a move, a child, a separation.

Example

Sam is 40 and wants to retire at 65. These are the assumptions. They are examples only, not real estimates for you.

Yearly need in retirement, in today’s dollars: $40,000.
Calculator estimate: CPP of $800 a month and a partial OAS of $500 a month.
No workplace pension.
Retired for 25 years, from 65 to 90.
No taxes in this simple example.

Line	Math	Yearly amount
Yearly need		$40,000
CPP	$800 × 12	$9,600
OAS	$500 × 12	$6,000
Gap	$40,000 − $9,600 − $6,000	$24,400
Savings needed at 65	$24,400 × 25 years	$610,000

Checked October 2026. This assumes his savings grow just as fast as inflation, no faster.

How much should Sam save each year? He has 25 years until 65.

With no growth above inflation: $610,000 ÷ 25 = $24,400 a year, or about $2,033 a month.
If his savings grow 3% a year above inflation (an assumption, not a promise): about $16,731 a year, or about $1,394 a month.

These numbers can look big. Many people fill the gap with a mix: a workplace plan, RRSP tax refunds, a spouse’s savings, working a few more years, or spending a bit less. Small changes in the inputs make a big difference. That is why you redo the plan every year.

Common mistakes

Guessing CPP and OAS instead of using your real statement and the calculator.
Assuming you will get the full OAS. Many immigrants get a partial amount.
Planning for too few years. Many people live into their 90s.
Making a plan once and never updating it.

✅ My checklist

☐ I chose a target retirement age.
☐ I estimated my yearly spending in retirement, in today’s dollars.
☐ I used the Canadian Retirement Income Calculator.
☐ I worked out my gap and my yearly saving target.
☐ I set up an automatic transfer and a yearly review date.

Next in this topic → When to start CPP: 60, 65 or 70?

Back to the topic → Retirement

There are no affiliate or referral links in this post. This is general information, not financial, tax or legal advice; everyone’s situation is different. Figures were checked in October 2026 and can change.

Sources: Canadian Retirement Income Calculator · OAS: how much you could receive · CRA: MP, DB, RRSP, DPSP, ALDA, TFSA limits and YMPE