Do you want to retire but don’t have enough money to do so comfortably? You’re not alone. Over half of Canadians (59%) say they worry about outliving their retirement savings, according to CPP Investments (1).
Another survey found that nearly half of those surveyed feel anxious about whether their savings will last them through retirement (2). With so many Canadian adults feeling like they won’t have the income to support them in their golden years, this is a significant problem.
Let’s consider Darren in this situation. At 65, he earns $70,000 a year, has $500,000 in his Registered Retirement Savings Plan (RRSP) and wants to quit working as soon as possible. However, to achieve that dream, he knows he’ll need to be creative.
Financial experts generally suggest that most Canadians will need around 60% to 80% of their pre-retirement income to maintain a similar standard of living once they exit the workforce (3). In Darren’s case, that works out to about $4,667 a month.
Darren believes he can make do with less. He’s debt-free, lives modestly, is relatively healthy and expects to receive nearly $1,700 a month from Old Age Security (OAS) and Canada Pension Plan (CPP). He plans to supplement his government benefits with roughly $2,000 from his savings each month, which should be sufficient for a comfortable retirement.
The issue is where that additional $2,000 will come from. Using the 4% rule, a commonly applied guideline for retirement withdrawals, Darren’s $500,000 savings would provide him with about $1,667 a month. That’s not enough, so he needs to find alternatives. Here are some he could consider.
If Darren can work longer, he should consider it. Canadian data shows that more older workers are delaying retirement, either by choice or out of necessity. For example, in 2023, approximately 15% of people aged 65 and older were still in the workforce — an all-time high (4). It isn’t always a popular choice, but working longer can reduce the amount you need to save.
If you max out your workplace retirement account contributions, it will make a huge difference, especially if your employer matches them. Typical employer contribution-matching can range between 3% and 7% of an employee’s salary. In 2025, Canadians can contribute as much as 18% of their income to an RRSP up to $32,490.
If Darren’s employer offers a group RRSP, he could potentially double part of his savings. Additionally, he could contribute up to $7,000 into a Tax-Free Savings Account (TFSA) for tax-free growth on his deposits. The combined accounts can significantly boost his retirement savings over time, even more so if he consistently invests through his final working years and takes full advantage of his employer contribution match.
Working longer also means larger government benefits. Both OAS and CPP will reward you with higher monthly income the longer you wait to claim. So, if Darren delays receiving his OAS, his payments will increase 0.6% for every month — or 7.2% every year — he waits past age 65, up to a maximum of 36% more by age 70.
Likewise, CPP benefits increase 0.7% every month — or 8.4% each year — you delay after 65, up to a maximum of 42% more if you wait until you’re 70.
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One alternative to gradually drawing down retirement savings is leaving the balance invested in income-generating assets, while drawing only a part of it. The beauty of this strategy is that you can keep your money fully invested and receive payments. But there are trade-offs.
For example, if Darren has $500,000 invested and wants to receive $2,000 monthly, he’ll need an annual yield of 4.8% to maintain the balance. The safest way to do this is through government bonds, which yield far less and don’t keep up with inflation. But higher-yield options exist. Some Canadian dividend stocks yield up to 4.5% — but they come with higher risk and payout volatility.
A more reasonable strategy would be to use a hybrid approach: Aim for a moderate investment yield and use savings, such as from a high-interest savings account, to bridge any gaps. This way, Darren keeps more money invested, accepts a slightly lower yield and adjusts his withdrawals over time in tandem with cost-of-living and inflation changes to sustain his retirement nest egg over time — especially since new research suggests 3.7% as the safe withdrawal rate for new Canadian retirees.
Another safe bet could be to target a lower yield while slowly drawing down retirement funds to make up the difference.
If continuing to work full time isn’t an option, Darren might consider working fewer hours for the same company or perhaps doing something else, like freelancing, consulting, tutoring or even taking a few shifts at a local shop.
It doesn’t have to be a full-time commitment. Even if the job brings in $1,000 a month, that still cuts his extra income needs by half and eases the strain on his savings.
In this scenario, Darren could feasibly live off his new paycheque, OAS, CPP and income from his investment portfolio without potentially needing to withdraw any savings. Then, by the time he fully retires his portfolio should have grown through capital appreciation, and with fewer years of withdrawals ahead of him.
Darren could also use his home to plug his shortfall. When you own property, it’s possible to extract money from it. Options include:
If none of those are viable options, Darren could consider a reverse mortgage, which allows homeowners age 55 or older to convert part of their home equity into cash that doesn’t need to be repaid until they sell their home or die. But weighing the drawbacks here — including declining equity and possible higher interest rates — is key.
— with files from Melanie Huddart
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CPP Investments (1); HOOPP (2); Government of Canada (3); Vanier Institute (4)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.