The Retired Canadian’s Playbook: How To Quit Work Without Going Broke
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This post was created by Innovation Federal Credit Union

Retirement is something many Canadians dream about years before it actually comes, but the reality of leaving work can be stressful. Having enough savings, managing expenses, and making money last are big concerns. Planning and making smart financial moves can help you enjoy retirement without worrying about running out of money.

One of the first steps is organizing your finances so you can easily track income and spending. If you don’t want to pay unnecessary fees and want to keep more of your money available for what matters most, a no-fee chequing account allows you to manage daily transactions without hassle. The key to a comfortable retirement is knowing where your money is going and ensuring it works for you.

How Much Money Do You Really Need?

The answer depends on your lifestyle, location, and spending habits. Many financial experts suggest the 70 percent rule, which means you should aim to replace 70 percent of your pre-retirement income. However, this number varies based on personal choices and circumstances.

Housing, travel, and medical expenses can all impact how much you need. Some people find they need less money because they no longer have work-related costs. Others may want to travel more or help family members, which can increase their required savings. The key is to calculate your expected expenses and compare them to your available income sources.

Retirement Income Sources

  1. Canada Pension Plan (CPP)

CPP provides monthly payments in retirement. The amount you receive depends on how much you contributed during your working years. The maximum payout in 2024 is about $1,300 per month, but many people receive less.

You can start taking CPP as early as 60 or delay it until 70. If you start early, your payments will be lower. If you wait, your monthly amount increases. Delaying CPP can be a smart move if you have other income sources to rely on in your early retirement years.

  1. Old Age Security (OAS)

Unlike CPP, you do not need to contribute to receive it. The maximum monthly payment is around $700, but high-income retirees may have some of their OAS clawed back. Like CPP, you can delay OAS to receive larger payments. This can be a useful strategy if you are still working or have other income sources.

  1. RRSPs and RRIFs

Your RRSP is a key retirement savings tool, but eventually, you must start withdrawing money. By the end of the year you turn 71, your RRSP must be converted into a Registered Retirement Income Fund (RRIF) or an annuity.

RRIF withdrawals are taxable, and there is a minimum amount you must take out each year. Planning your withdrawals wisely can help you minimize taxes and make your savings last longer. Some retirees withdraw smaller amounts early to reduce the tax burden later.

  1. Tax-Free Savings Account (TFSA)

TFSAs are useful for retirement because withdrawals are tax-free. Unlike RRSPs, there is no mandatory withdrawal schedule. This makes them a great tool for supplementing income while keeping taxes low.

Using a TFSA strategically can help you manage cash flow and reduce how much you pay in taxes. Many retirees withdraw from their RRSPs first, while letting their TFSA grow for later years.

How to Manage Expenses in Retirement

Downsize Your Home

Some retirees choose to downsize to a smaller home or move to a more affordable area. Selling a large house can free up equity and reduce maintenance costs. Before moving, consider factors like property taxes, living costs, and healthcare access. Some people find that moving to a different province or city makes their retirement savings go further.

Control Healthcare Costs

While Canada has a public healthcare system, not all expenses are covered. Prescription drugs, dental care, vision care, and home support services may require out-of-pocket payments. Private health insurance can help cover some of these costs. Many retirees also set aside money in a dedicated healthcare fund to prepare for future medical needs.

Reduce Everyday Costs

  • Take advantage of senior discounts on travel, dining, and entertainment.
  • Use public transportation or senior transit programs to save on vehicle expenses.
  • Cook at home more often instead of eating out.
  • Review subscriptions and memberships to cut unnecessary spending.

Top Ways to Make Money Last

A Withdrawal Strategy

One common approach is the four percent rule, which suggests withdrawing four percent of your savings each year. This method helps balance spending while preserving your nest egg.

Some retirees prefer a flexible approach, as they withdraw less in years when the market is down and more in good years. This helps maintain financial stability and reduces the risk of running out of money.

Part-Time Work or Passive Income

Consulting, freelancing, or turning a hobby into a source of income can help stretch savings further. Passive income sources like rental properties, dividends, and investments can also provide additional cash flow. Diversifying income streams reduces financial pressure and makes retirement more secure.

This content was produced independently from the Worldcrunch editorial team.