TLDR:
- Retirement income in Canada typically comes from several unique sources
- Understanding the tax implications and withdrawal rules of each source can help create an efficient income stream that lasts through retirement
- Whether you’re an employee or a business owner, there are workplace savings strategies that can help boost your retirement income
- Naming beneficiaries for each of your investments can simplify the transition of assets to your loved ones
Source #1: Government retirement benefits
Government retirement benefits may help form a predictable, lifelong part of your retirement income stream. However, it’s important to understand what you’re entitled to and what is taxable to maximize your benefits.
| Eligibility | Maximum monthly payment amount | Taxable | |
| Canada/Quebec Pension Plan (CPP/QPP) | You must be at least 60 years old and have made at least one valid contribution to the CPP. | For 2025, the maximum monthly amount you could receive as a new recipient starting the pension at age 65 is $1,433.00. | Yes |
| Old Age Security (OAS) | If you are living in Canada, you must be at least 65 years old, a Canadian citizen or legal resident and have resided in Canada for at least 10 years. If you are living outside of Canada, you must be at least 65 years old, a Canadian citizen or legal resident of Canada on the day before you left Canada and have resided in Canada for at least 20 years since the age of 18. No working or contribution requirement. | If you are receiving a full OAS pension, for July to September 2025, the maximum monthly payment amount you could receive is $808.45. | Yes |
In addition, you may also qualify for the Guaranteed Income Supplement, the Allowance or the Allowance for the Survivor. These three benefits are not considered taxable income and amounts are calculated based on your age, marital status and your annual income.
Tips:
- To help you better understand your future financial security, the Government of Canada has a Canadian Retirement Income Calculator, which can provide you with an estimate of your retirement income.
- Consider income splitting or income deferral strategies to keep your income below the OAS recovery tax (clawback) threshold. Speak to your bank advisor for more details.
Source #2: Income from converted RRSPs
An RRSP must be converted to a RRIF or annuity, or paid out in a lump sum by the end of the calendar year in which you turn age 71.
- Registered Retirement Income Fund (RRIF)
- An investment plan within your control
- Tax-sheltered until withdrawn
- Mandatory minimum annual withdrawals
- Annuities
- A financial contract with an insurance company
- Guaranteed set payments comprised of a return of original lump-sum capital (non-taxable) and interest income (taxable).
If you were part of a registered pension plan with a previous company, you may have a Locked-In Retirement Account (LIRA). A LIRA is similar to an RRSP in that you have to make decisions on what to do with it by the age of 71.
Tips:
- Ensure that any beneficiaries named in your Will do not conflict with beneficiaries named on your registered plans. This may help avoid unnecessary legal expenses and conflicts.
- If you are paying yourself a salary from your incorporated business, you may be able to boost your retirement savings by setting up an Individual Pension Plan (IPP). Speak to your advisor for more information on IPPs.
Source #3: Employer pension plan
If applicable, make sure you understand your pension benefits at your current and past companies. Be sure to review your annual statements to stay on top of any income you may be entitled to.
Tips:
- If you leave your pension with your employer, ensure that you have designated your desired beneficiary.
Source #4: Personal savings and investments
Don’t forget to consider your other personal savings and investments, which may include registered and/or non-registered assets, like:
- TFSA savings – Which you can withdraw tax-free at any time.
- Home equity – For example, you can consider a Reverse Mortgage in which you can convert a portion of your home equity into tax-free cash. Check with your advisor for more options.
- Other savings and investments such as GICs, mutual funds and rental property that you own.
Tips:
- Consider setting up a prescribed rate loan to even out the income between your family members from your non-registered assets, which may lower your family tax bill.
Regardless of how you assemble your retirement funds, if you start with a thorough understanding of the options available, you’ll be equipped to build on a solid foundation. Speak to your advisor about having a financial plan prepared or updated to determine if you have enough assets and income to meet your expected expenses in retirement.
Related stories:
- When do Doctors Usually Retire? How to Decide if You’re Ready for it?
- Improve your financial management skills at every life stage
- Tax Planning: Should I contribute to a spousal RRSP?
Source:
- Government of Canada – Public Pension
- RBC Wealth Management “Retirement Checklist – Making the most of your retirement“, September, 2020
- RBC – Where Will My Retirement Income Come From?
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
