The question we hear most often from clients approaching retirement is not “do I have enough?” It is “how do I turn what I have into income I can count on?” Those are different questions, and the second one is harder.
Canada’s retirement system is more layered than most people realise. Understanding what you have, what you are entitled to, and how the pieces interact is the starting point for building an income plan that lasts.
The three layers of Canadian retirement income
Most Canadians approaching retirement have access to some combination of three income sources:
Government benefits: The Canada Pension Plan (CPP) and Old Age Security (OAS) form the base. CPP is based on your contribution history. OAS is based on residency. Both have rules around timing — you can take CPP as early as 60 or as late as 70, with meaningfully different monthly amounts depending on when you start.
Employer pensions: If you have a defined benefit (DB) pension, your retirement income calculation is largely done for you. The plan tells you what you will receive based on years of service and salary history. If you have a defined contribution (DC) plan, the math is more complex — you have accumulated a balance, not a guaranteed income stream.
Personal savings: RRSPs, TFSAs, non-registered investments, real estate. The flexibility here is high; so is the complexity.
The conversion problem
Most retirement planning conversations focus on accumulation: save more, invest wisely, reduce fees. That advice is correct as far as it goes. But it sidesteps the harder problem: converting a lump sum into a predictable monthly income that does not run out before you do.
This is where annuities and other guaranteed income products enter the picture, and where most people have the least information.
A life annuity is a contract with an insurance company: you hand over a capital sum, and the insurer guarantees a monthly payment for as long as you live. The payment does not fluctuate with markets. It does not require investment decisions. It arrives every month, regardless of what happens in the broader economy.
The tradeoff is liquidity. Once you purchase an annuity, the capital is no longer accessible. For that reason, most retirement income plans use annuities to cover essential expenses — housing costs, food, utilities — while keeping a portion of savings in accessible investments for discretionary spending and unexpected needs.
CPP timing: the decision most people rush
The default assumption for many Canadians is to take CPP at 65. It is not always the right answer.
Delaying CPP to 70 increases the monthly benefit by 42 per cent compared to taking it at 65. For a client who is healthy, has other income sources that can bridge the gap, and has family longevity on their side, delaying often produces a significantly better lifetime outcome.
Taking CPP early — at 60 — reduces the benefit by 36 per cent compared to 65. For clients with health concerns, limited bridge income, or a strong preference for the certainty of early receipt, earlier can be the right call.
The break-even point for delaying from 65 to 70 is typically around age 82 to 84. If you live past that point, you collect more in total by waiting. If you do not, you collect less. Neither outcome is certain. The decision belongs to you, made with accurate information about what each option actually produces.
What a retirement income review looks like
When we work through retirement planning with a client, we start with a simple inventory: what income sources exist, when they start, and what they pay. We then map that against a realistic picture of expenses — including the healthcare costs that tend to increase in the later years of retirement.
The gaps we find most often:
- CPP taken early without modelling the lifetime cost of that decision
- No plan for the period between retirement and OAS eligibility at 65
- Annuity products overlooked entirely because they feel complicated
- No income-replacement plan for the death of a spouse
None of these are irreversible at the planning stage. They become much harder to address after the fact.