How Much Money Do You Need Per Month to Retire in Canada?

No two people will retire the same way.

We all have different lifestyles, health, locations, assets, and bills to pay.

Retirement planning and budgeting must be ultra-personalized to be effective, but there are still benchmarks one can refer to.

To retire comfortably in Canada, experts say to aim for 70–80% of your pre-retirement income annually.

That's about $56,000–$64,000 if you earned $80,000.

Use the 70% rule, save 10 times your final salary, or withdraw 4% of your savings yearly.

Factor in lifestyle, real estate, health, inflation, and government benefits like CPP and OAS.

Navigating retirement planning can be a daunting, head-scratching task.

But it doesn't have to be.

Take a look through this guide to see how much money you'll need in a month to retire, and what steps to take next.

Common Guidelines for Retirement Income

While everyone's situation is one of a kind, there are benchmarks used to act as a guide to estimate how much retirement income you'll need.

Understanding them can make planning easier and help you set more realistic goals.

These provide the answers to how much you'll really need, overall and per month.

The 60–70% Rule

This is one of the most common benchmarks used in retirement planning.

The idea is that to maintain your current lifestyle after you retire, you'll need about 60–70% of your pre-retirement income each year.

Once you retire, some expenses, like commuting costs and mortgage, may decrease or disappear entirely.

However, this rule assumes a fairly average lifestyle.

It does not take personal differences such as healthcare needs, hobbies, travel plans, or debt into account.

It's a great starting point, but if you're looking for an approach that can bend more towards your lifestyle, maybe one of the others is a better choice for you.

Income-Based Approach

This approach takes a more nuanced look at how much you'll need.

The focus is on the use of the income rather than the income itself.

Instead of applying a blanket percentage, it considers that lower-income earners may need to replace closer to 90–100% of their income in retirement.

This is because a larger portion of their earnings go to everyday necessities.

Meanwhile, higher-income earners can get by with just 50–60%, because their spending habits lean more towards discretionary items.

Monthly Income Averages in Canada

On average, senior families in Canada bring in about 6,183 CAD per month after tax.

Individual seniors earn around 2,800 CAD per month.

These numbers reflect total after-tax income, including all sources like pensions, savings, and investments.

It's helpful to be familiar with these figures-they'll help you understand what retirement income and what a monthly budget typically looks like.

Factors That Affect Monthly Retirement Needs

Now we have the numbers down, but we'll also need to consider other aspects of your life to get the best estimate.

Your retirement age, lifestyle preferences, and potential healthcare costs all have an impact on how much you'll need to comfortably cover your expenses.

Particularly, be mindful of your:

• Retirement age and savings timeline

• Lifestyle choices

• Healthcare and long-term care expenses

• Debt, dependents, and housing

• Longevity and inflation impact

If you're not sure where to start, check out these top 5 factors to consider for retirement.

Main Sources of Monthly Retirement Income

Government Benefits

For most Canadians, these benefits make up a chunk of retirement income:

• Canada Pension Plan (CPP)

• Quebec Pension Plan (QPP)

• Old Age Security (OAS)

• Guaranteed Income Supplement (GIS)

The CPP/QPP offers both a maximum payout and average payout, which vary depending on your contribution history.

OAS and GIS provide support with age and residency eligibility.

Both programs are adjusted for inflation to maintain their purchasing power over time.

Employer Pensions

Retirees also rely on Defined Benefit (DB) plans and Defined Contribution (DC) plans.

DB plans provide a stable, guaranteed payout based on salary and years of service.

DC plans rely on individual contributions, usually matched by an employer, and the payout depends on the performance of the investments made with those contributions.

DB plans offer more security, but DC plans give better flexibility and control over assets.

Personal Savings and Investments

Personal savings fill in the deficit you might have even after pensions and benefits.

These can include Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs) and non-registered investment accounts you've built up over the years.

RRSPs are government registered accounts where contributions are tax-deductible and investments grow tax-deferred. You'll pay tax on withdrawals in retirement, ideally when in a lower tax bracket.

TFSAs are flexible, registered accounts where any gains are tax-free even when withdrawn. Contributions are not tax deductible.

Non-Registered accounts are investment or savings accounts that aren't registered with the government. There are no contribution limits, but you'll pay tax on any gains.

As you transition into retirement, these savings may be converted into income through avenues such as Registered Retirement Income Funds (RRIFs) or annuities.

How much you'll draw and the longevity of it will depend on your withdrawal strategy, market performance, and your retirement age.

How Inflation Impacts Monthly Needs

Inflation may seem small looking at it year by year.

But as it builds over decades, it can erode your retirement income's purchasing power.

Between 2013 and 2023, the price of everyday expenses in Canada, such as groceries and gas, steadily climbed with an average annual inflation rate of around 2%.

Inflation spiked in recent years, reaching a peak of 6.8% in 2022 before moderating.

This means that if you need 4000 CAD per month to live comfortably today, you would need over 7,000 CAD per month in 30 years to maintain the same lifestyle.

That's assuming the average 2% annual inflation rate compounds over time.

To protect your future from inflation's impact, consider:

• Diversifying your portfolio

• Delaying your CPP benefits to increase your payout

• Staggering annuity purchases over time

Retirement Planning Strategies

Retirement planning is a dynamic strategy that grows as you do.

Starting smart means budgeting in the present by understanding your financial habits and comparing them to what you might need in decades.

Entertainment usually unfolds in stages where:

• Early retirement is active and travel-heavy

• Mid-retirement downsizes and has simpler routines

• Late retirement involves healthcare costs or assisted living

You need to consider how your spending patterns will change across these stages.

Saving goals can shift as well.

Saving 15% of your income in your 30s might increase to 20% or more in later years.

It's helpful to use online tools and retirement calculators to get the best picture of your future needs.

Creating a pre-retirement checklist to have a clear visual of everything you need to do to prepare also helps.

When to Seek Professional Advice

There are several resources available to help you plan out your retirement.

But for a lot of people, it's a lot to handle alone, especially with all the other things going on with life.

That's where advisors come in.

Financial advisors can create tailored retirement plans for your income, lifestyle, and long-term priorities.

They take your current financial situation and help you map out realistic monthly income targets for retirement.

And of course, they take taxes, benefits, and inflation into account.

If you do decide to go to an advisor for help, it's important to check in with them regularly so that they can adjust your plan to your changing situation.

There's no single magic number for retirement, but there are ways to find your number.

Everyone retires differently.

Understanding your financial situation, retirement benchmarks, income sources, environmental variables, and enlisting some help if needed is the best way to gear up for your future.

And if you want to get started as soon as now, we've got you covered.

Talk to one of our advisors to figure out what you’ll need each month and how to get there.