Retirement Calculator

How Much Should You Save for Retirement?

The general rule in Canada is to aim for a retirement income equal to 70% of your gross income before retirement. This proportion accounts for the fact that some expenses decrease in retirement (transportation, work clothing, contributions) while others may increase (healthcare, leisure, travel).

To reach this goal, experts recommend saving between 10% and 20% of your gross income each year. The earlier you start, the less effort is required thanks to compound interest. Someone who begins saving at 25 will need to set aside about 10% of their income, while someone starting at 40 will need to save 20% or more to reach the same goal.

RRSP, TFSA, or Both?

The RRSP (Registered Retirement Savings Plan) is the classic retirement planning tool in Canada. Your contributions are tax-deductible, which immediately reduces your tax bill. Withdrawals are taxed as income in retirement, ideally at a lower rate than during your working years.

The TFSA (Tax-Free Savings Account) offers a different kind of flexibility: contributions are not deductible, but all withdrawals are completely tax-free. It's an excellent complement to the RRSP, especially if you expect a similar or higher tax rate in retirement.

The optimal strategy often combines both: maximize your RRSP when your marginal tax rate is high and use the TFSA for additional savings. Use our RRSP vs TFSA comparison to see which one gives you the best return based on your salary.

CPP and OAS: How Much to Expect?

The Canada Pension Plan (CPP) provides a monthly benefit based on your contributions throughout your career. The maximum benefit at age 65 is approximately $1,365 per month in 2026, but the average benefit is around $800 per month. Use our CPP simulator to estimate your pension based on your start age.

Old Age Security (OAS) is a federal program that pays approximately $700 per month starting at age 65, provided you have lived in Canada for at least 10 years after the age of 18. OAS is partially clawed back if your annual income exceeds approximately $90,000.

Together, CPP and OAS can provide a base income of approximately $18,000 per year. That's a good floor, but rarely enough to maintain your standard of living. Personal savings are essential to bridge the gap.

The Power of Compound Interest for Retirement

Compound interest is the most powerful engine of retirement savings. The principle is simple: your returns generate their own returns, creating a snowball effect that accelerates over time.

Concrete example: if you invest $500 per month at a 5% annual return for 35 years, you will have contributed $210,000. But your portfolio will be worth approximately $570,000: compound interest will have added $360,000, more than your total contributions!

That's why starting early is so important. Every year of delay costs you thousands of dollars in lost compound returns. Visualize the effect with our compound interest calculator. Even small regular contributions, started early, produce impressive results over 30 or 40 years.