Preparing for retirement

The prospect of retirement is exciting but planning for it requires making important decisions in order to ensure that retirement is fulfilling and free of worries. Ensure that you are fully prepared for this significant stage of your life by considering the following.

Determine how much money you need for retirement

The amount of money you will need to save depends on the ways in which you plan to spend your retirement. Some important factors to consider include:

  • Travel plans
  • Hobbies
  • Age at retirement
  • Supporting children or grandchildren
  • Place of living
  • Outstanding debts
  • Other dependants

Familiarize yourself with sources of retirement income

There are a variety of income sources available to retiring Canadians. Some of the most common include:

  1. Canada Pension Plan (CPP): This pension provides individuals and their families with partial replacement of earnings in certain situations, with retirement being one of them. Almost all individuals who work in Canada (with the exception of residents of Québec) contribute to the CPP. The amount paid as a CPP benefit is dependent on how much and for how long a person has contributed to the CPP.
  1. Old Age Security (OAS) Pension: OAS is a monthly benefit for Canadian citizens and residents over the age of 65. Canadians over the age of 65 are entitled to OAS regardless of whether they are currently employed, were employed in the past, or have never been employed. Eligibility for OAS is dependent on the length of time during which a person has lived in Canada.
  1. Pension from employment: Some employers provide for a defined benefit or a defined contribution pension plan which will be paid out on retirement. Contact your employer for further details specific to your plan.
  1. Personal retirement savings and investments: You may have other source of income that you can rely on during your retirement. Two common sources of retirement income include Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).

This list is not exhaustive, and there are many other sources of income for retiring Canadians. Please consult a TEP for further information.

Create a budget

Creating a budget is vital to retirement planning – as is following the budget during retirement. Having a plan to manage money can help balance income with everyday expenses and guide spending. In addition, as someone retires, their expenses change. For example, while a person may no longer spend money on commuting to and from work, or their residence may be paid off, they may spend additional money on interests and hobbies, travel, or supporting dependents.

How long someone lives will also impact how much money they will need for retirement. Statistics indicate that people live longer than in the past. As such, new retirees are advised to budget for at least 30 years of retirement.

Pay outstanding debts

As sources of income are less flexible once a person is retired, it is important to ensure that retirement income stretches as far and as long as possible. As such, it is important to clear as many outstanding debts as possible. Such debts may include credit card bills, mortgage payments, lines of credit, etc. Even if it is not possible to clear the debts entirely, lowering the amounts owed is prudent when planning for retirement.

Deciding when to retire

Deciding when to retire is a significant decision. It is important to have a basic idea of how long someone will be retired in order to plan accordingly and ensure that there is enough money to support the retiree throughout the entire duration of retirement.

In deciding when to retire, some factors to consider include:

  • Desired lifestyle
  • Spouse’s retirement plans
  • Health and spouse’s health
  • Current financial obligations and living expenses

For further information, or assistance in preparing for retirement, please consult a TEP.


An article of this kind can never provide a complete guide to the law in these areas, which may be subject to change from time to time. The opinions and suggestions made within this article should not be interpreted as specific advice in relation to any particular individual or individuals. Neither STEP, the article author or their firm accept responsibility for any loss occasioned by someone acting or refraining to act on the basis of the opinions and suggestions contained in this article. More