Canada Retirement Reality: Planning Beyond 65

Effective November 10, 2025, Canada will abolish the fixed retirement age of 65, marking a monumental shift in how Canadians approach their later working years and financial futures. This change grants new flexibility but places greater emphasis on proactive planning. For many, the concept of retirement seems distant or even impossible. High day-to-day living costs, persistent inflation, profound economic uncertainty, and the crippling costs of housing affordability have made saving a formidable challenge. If you are concerned about whether you have enough saved or how to navigate the complex landscape of government benefits, this guide provides the essential knowledge you need to secure your financial stability post-2025.

The New Canadian Retirement Landscape

The abolition of the fixed retirement age of 65 means that employers can no longer mandate retirement based solely on age. This change reflects a growing need for financial flexibility and the reality that many Canadians must, or choose to, work longer.

While this shift offers freedom, it underscores a critical truth: your retirement date is now entirely dependent on your financial readiness, not a calendar date.

Navigating Canada’s Core Retirement Benefits

When planning for retirement, your foundational income will likely come from three main government sources: the Canada Pension Plan (CPP), Old Age Security (OAS), and the Guaranteed Income Supplement (GIS).

1. Canada Pension Plan (CPP)

The CPP provides a modest, taxable income based on your lifetime earnings and contributions.

• Key Point: If you have worked most of your life, the CPP will provide essential income, but it is rarely enough to cover all expenses comfortably. The benefit amount is directly linked to how much you contributed and for how long. You can start CPP as early as age 60 or defer it until age 70 for a significantly higher payout.

2. Old Age Security (OAS) Pension

OAS is the backbone of senior income security and is not based on your work history.

• Key Point: OAS is a non-contributory pension strictly based on residency. You can receive the OAS pension even if you have never worked in Canada, provided you meet the residency requirements (generally, 10 years of residence after age 18 to qualify for a partial pension, or 40 years for a full pension). OAS benefits are subject to a clawback for higher-income earners.

3. Guaranteed Income Supplement (GIS)

GIS is a crucial, non-taxable monthly benefit designed to supplement the income of low-income OAS pensioners.

• Key Point: To qualify for GIS, your annual income (or combined income if married/common law) must fall below a certain threshold. It is essential for Canadians relying primarily on government benefits.

Important Transition Note: In some circumstances, if a person is not eligible for the OAS pension, they may be able to continue receiving ODSP (Ontario Disability Support Program) income support as long as they financially qualify, ensuring no sudden gap in necessary assistance.

The Biggest Mistakes to Avoid in Retirement

Smart retirement planning hinges as much on avoiding pitfalls as on strategic saving. Here are the most common and costly mistakes Canadian retirees make:

1. Underestimating Inflation and Longevity

Many plan for the first 10 years and forget the next 20. Failing to account for annual inflation (which reduces purchasing power) and the possibility of living into your 90s can lead to running out of money too soon.

2. Ignoring Healthcare and Long-Term Care Costs

While provincial health plans cover basics, costs for non-covered prescriptions, dental care, assistive devices, and long-term care facilities can rapidly drain savings. Budgeting for health expenses should be a major consideration, especially past age 75.

3. Poor Withdrawal Strategy

Improperly drawing down registered accounts (like RRSPs and TFSAs) can trigger unexpected tax liabilities and cause OAS clawbacks. Working with an advisor to set an optimal withdrawal sequence—usually prioritizing non-registered funds, then TFSA, then RRSP/RRIF—is vital.

4. Failing to Optimize Government Benefits

Choosing the wrong time to start CPP or OAS (e.g., starting CPP at 60 when you could physically work a few more years) can cost you tens of thousands of dollars over the course of your retirement.

How to Keep Your Retirement Nest Egg Safe

Once you’ve saved, protecting those funds from market volatility and economic uncertainty becomes paramount.

Where Can You Save Money for Retirement?

To maximize tax efficiency, focus on these registered accounts:

• Registered Retirement Savings Plan (RRSP): Contributions are tax-deductible now, but withdrawals are taxed in retirement. Ideal for those who expect to be in a lower tax bracket later.
• Tax-Free Savings Account (TFSA): Contributions are made with after-tax dollars, but all growth and withdrawals are tax-free. Ideal for flexible withdrawals and income that won’t trigger OAS clawbacks.
• Non-Registered Accounts: Standard investment accounts that offer flexibility but no tax shelter on annual investment income.

How Can You Keep Your Retirement Nest Egg Safe?

1. Diversify Your Assets: Reduce risk by spreading investments across different asset classes (stocks, bonds, real estate). As you near or enter retirement, shift to a more conservative allocation.
2. Maintain Liquidity: Ensure you have 1–2 years of living expenses set aside in cash or highly liquid, low-risk investments to avoid selling equity when the market is down.
3. Review Beneficiaries: Ensure all registered accounts and insurance policies have up-to-date beneficiaries to guarantee funds pass directly and efficiently to your heirs.

Other Ways to Prepare Financially for Retirement

Financial readiness goes beyond just savings balances:

• Downsizing Strategy: For many, leveraging home equity is the final essential piece of the retirement puzzle. Plan whether downsizing, taking out a reverse mortgage, or renting is the right path.
• Estate Planning: Draft or update your Will, Power of Attorney for Property, and Power of Attorney for Personal Care. These documents protect your wishes and assets in complex situations.
• Debt Reduction: Entering retirement debt-free (especially mortgage-free) is the single biggest factor in financial peace of mind.

Connect with a Retirement Planning Advisor

The complexities of tax law, government benefits optimization, and investment withdrawal strategies are difficult to manage alone.

A dedicated retirement planning advisor can help you:

• Project your future income needs, factoring in inflation.
• Determine the optimal timing for starting your CPP and OAS benefits.
• Structure your RRSP/RRIF withdrawals to minimize tax burden and prevent OAS clawbacks.

The future of Canadian retirement is flexible, but it demands preparation. Start planning today to ensure the years following November 10, 2025, are secure and prosperous.