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Retirement Income in Canada: Turning Savings Into a Paycheque

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Retirement income planning is about turning savings into a steady paycheque that lasts, on top of the income governments pay. This hub covers the main approaches and links to a guide for each. It is part of the retirement section; how much you need to save is in the retirement planning hub.

The income floor

CPP, OAS and, for low incomes, the GIS are paid for life and rise with inflation. The retirement income floor shows what they add up to in common situations; savings fill the gap between that floor and your spending.

The current CPP, OAS and GIS amounts, next to what retirees actually receive, are on average retirement income in Canada.

Turning savings into income

Withdrawal rate. A common starting point is the 4% rule: withdraw 4% of the portfolio in the first year, then the same amount adjusted for inflation. In US historical data it lasted at least 30 years in every period tested. Longer retirements, or a portfolio held mostly in cash and bonds, call for a lower rate.

PortfolioFirst-year income at 4%A month
$500,000$20,000$1,667
$750,000$30,000$2,500
$1,000,000$40,000$3,333

Buckets. Some retirees keep one to two years of spending in cash or GICs, a few years in bonds, and the rest in stocks. Spending comes from cash, which is refilled from the other buckets, so stocks don’t have to be sold after a fall. A fall early in retirement, while withdrawals are being made, does the most lasting damage (sequence-of-returns risk); asset allocation by age shows how large past falls were.

A guaranteed layer. An annuity converts part of your savings into income for life, adding to the CPP and OAS floor. The annuity calculator estimates payments and annuity vs RRIF compares the two.

Order of withdrawals and tax

Which account you draw from each year changes the tax you pay and, at the edges, OAS and the GIS. What to do with money after retirement covers the order of withdrawals, filling low tax brackets, and retiring on an RRSP and TFSA without a pension. The rules that shape it:

  • An RRSP must mature by December 31 of the year you turn 71: by then you convert it to a RRIF, buy an annuity, or withdraw it as taxable income (or combine these). From the year after you open a RRIF, you must withdraw at least the year's minimum: the January 1 balance times a factor for your age at the start of the year (or your spouse's age, if you choose), which is 1 ÷ (90 − age) up to 70 and CRA's prescribed factor from 71; you can always take more.
  • You can allocate up to 50% of your eligible pension income to your spouse or common-law partner with a joint election on Form T1032 filed with both returns, if you were both Canadian residents on December 31 and were not living apart because of a relationship breakdown for 90 days or more including December 31; RRIF (including LIF) and RRSP annuity payments count only if you are 65 or older at the end of the year (or received them because your spouse died), and OAS and CPP/QPP never count.
  • Income earned in a TFSA and TFSA withdrawals don't reduce federal benefits such as OAS, GIS and EI, or credits such as the Canada child benefit, the Canada workers benefit and the Canada Groceries and Essentials Benefit (formerly the GST/HST credit).
  • If your net world income is above the threshold ($93,454 of 2025 income), you repay 15% of the amount above it as recovery tax, taken from the OAS payments for the July 2026 to June 2027 period; the pension is fully recovered at about $152,062 (under 75) or $157,923 (75 and over).

Guides in this hub

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Sources

The figures and rules on this page come from these sources, last checked against them between September 22, 2026 and September 30, 2026. How we check facts.