How to plan for a comfortable retirement

Do you know exactly how much you should have saved up to retire comfortably? While Canadians approaching retirement believe they need more than $1 million in savings, the amount you require will depend on what retirement looks like for you.

It will depend on your spending habits, when you leave the workforce and how you plan to fill your days. What works for someone living modestly may not be enough for someone who wants to travel the world. Getting clear on those details now can help you enter retirement with confidence. Here are some things to consider when determining how much you’ll need to save.

What are your plans for retirement?

For most Canadians, retirement means more than leaving work behind; it’s about having the freedom to live each day on your own terms. For many, that can include overseas adventures, staying close to home with the grandkids, working part-time at the local golf course or taking up the hobby you never got around to pursuing. Your vision for retirement will help shape what you’ll require and how long your money will last.

Estimate your annual income needs

Once you know what you’ll be doing, you'll want to estimate how much you'll need to spend and generate in retirement. Start with your fixed costs: mortgage or rent, property taxes, car payments, insurance, utilities and groceries. Then, add in the variable expenses that give retirement its appeal, such as travel, club memberships or dining out regularly. Healthcare is another line item that tends to be overlooked but often grows over time, so factor that in too.

Then, list where any income might come from. Government benefits, such as the Canada Pension Plan (CPP)/Québec Pension Plan (QPP) and Old Age Security (OAS), form the foundation for many Canadians. Add to that any employer pensions, withdrawals from Tax-Free Savings Accounts (TFSAs), Registered Retirement Income Funds (RRIFs), Registered Retirement Savings Plans (RRSPs) and any other investments or income streams. When you compare what’s coming in to what’s going out, you’ll see whether there’s a gap to address or room to spare. 

Consider when you plan to retire

Of course, when you clock out also matters. With the cost of living on the rise, Fidelity’s 2025 Retirement Report found that a growing number of Canadians are rethinking their retirement age. Now, just 9% of pre-retirees plan to retire before 60, compared with 28% in 2005. Another 59% expect to retire at 65 or later, while 16% say they don’t intend to stop working at all. 

Naturally, if you work later in life, any savings will need to cover a shorter period of time than if you retire in your 50s. At the same time, when you take your CPP/QPP and OAS payments can impact your income, too. If you need to draw on CPP/QPP early, and you can start taking it as early as 60, you’ll receive less per month than you would if you waited until closer to 70 (or 72 for QPP), which is the age by which you must begin taking those payments. The same goes for OAS: you can start receiving money as early as 65 and as late as 70. Here are a few more things you might want to consider when thinking about when to retire.

How far will your savings get you?

Not surprisingly, your nest egg's longevity will depend greatly on your lifestyle. If you want your savings to last about 25 years and you can live on about $40,000 annually, you might need close to $1 million in savings (based on a typical 4% withdrawal rate). If you want to spend a little more, say $60,000 a year, you may need around $1.5 million. If you’re aiming higher, perhaps $90,000 a year, you’ll want savings in the range of $2 million or more.

Keep in mind, these figures assume your investments continue to grow and don’t account for CPP/QPP and OAS, which will reduce how much you’ll draw on your savings. According to Fidelity’s 2025 Retirement Report, pre-retirees believe they’ll need around $93,300 in annual income for a comfortable retirement and estimate roughly $1,020,000 in savings will get them there (presumably once government benefits and other income are factored in).

As the report points out, pre-retirees often underestimate the amount of money they’ll need in retirement. A common guideline is to replace 70 to 80 percent of your pre-retirement income, but what you’ll actually need will come down to your own lifestyle.

How to maximize your retirement savings

Getting the most from your retirement savings means using the right accounts and staying disciplined with your spending. An RRSP contribution lowers your taxable income today and lets your investments grow tax-deferred until you take the money out in retirement, when your tax rate is usually lower. A TFSA works differently: there's no upfront tax break, but everything you earn inside it grows completely tax-free, and it doesn’t get taxed when you withdraw.  

Sticking to a budget throughout your working years makes it easier to save consistently, even as expenses climb. If you can delay retirement by a year or two, your savings have more time to grow, and you’ll have fewer years to fund. And if you can delay taking CPP payments until you’re 70 (or 72 for QPP), you’ll boost your monthly payments.