Retirement can feel too far away to plan for, especially early in your career. But retirement planning isn't really about picking a number decades from now. It's about building habits today that quietly compound in your favour.
Why starting early matters more than starting big
Because investment growth compounds, money contributed in your 20s and 30s has far more time to grow than the same amount contributed in your 40s and 50s. In a hypothetical example at a 6% average annual return, $200 a month started at age 30 grows to about $285,000 by 65, while the same amount started at 40 grows to about $139,000. The head start does a lot of the work. See investing basics for how this works.
The three main sources of Canadian retirement income
- Government benefits: The Canada Pension Plan (CPP) is based on your working contributions. Old Age Security (OAS) is based on age and residency. Lower-income seniors may also qualify for the Guaranteed Income Supplement (GIS).
- Workplace savings: Employer pension plans, group RRSPs, or similar plans, plus any employer matching contributions.
- Personal savings: Accounts like a TFSA or personal RRSP that you contribute to on your own.
Most people rely on a combination of all three. Government benefits alone are rarely enough to fully replace pre-retirement income.
When to start CPP and OAS
You can start CPP as early as 60 or as late as 70. Starting before 65 permanently reduces your payment by 0.6% for each month early (up to 36% at 60), while waiting past 65 increases it by 0.7% per month (up to 42% more at 70). OAS starts at 65 and can be deferred to 70 for up to 36% more. The right timing depends on your health, other income, and whether you need the money sooner.
Setting a realistic goal
A commonly used rule of thumb is to aim to replace roughly 70% of your pre-retirement income, though your actual number depends on your expected expenses, whether your home is paid off, and your lifestyle plans. The goal doesn't need to be exact today. It needs to be good enough to guide a savings rate you can start with.
A simple way to set your savings rate
- Contribute at least enough to capture any employer match in full
- Increase your contribution rate gradually, for example with every raise
- Revisit your rate and investment choices once a year, not just once and forget it
Remember that RRSPs must be converted to a Registered Retirement Income Fund (RRIF) or annuity by the end of the year you turn 71.
It's never too early, or too late, to start
Whether you're just starting your career or thinking about retirement in the next several years, the best time to start is now. Map out your current savings with the free spending plan template, then talk to a qualified professional about your specific numbers.
Frequently asked questions
How much do I need to save for retirement in Canada?
A common rule of thumb is to plan to replace about 70% of your pre-retirement income from all sources combined, including CPP, OAS, workplace plans, and personal savings. Your actual number depends on your expenses, housing, and lifestyle.
When can I start collecting CPP?
You can start CPP between ages 60 and 70. Starting at 60 reduces your payment by up to 36%, while waiting until 70 increases it by up to 42% compared with starting at 65.
Is it too late to start saving for retirement at 40 or 50?
No. Starting later means you may need to save a higher percentage of income, but consistent contributions, capturing any employer match, and using unused RRSP and TFSA room that has carried forward can still make a meaningful difference.