Whether you’re 25 or 45, there is a bombardment of financial philosophies when it comes to saving for retirement in Canada. Despite our federal benefits (Canada Pension Plan, Old Age Security), fewer employed Canadians are retiring with a private pension that can satisfy their retirement income needs.

Retirement saving and income planning is changing for many people looking to retire in the short- or long-term. As we examine some of the most common myths, I’ll explain why they may no longer hold true in 2025 and moving forward.

 

1. There’s a “number” you need to save to be able to retire – $ 1 million

Still one of the most common questions I receive — “How much capital do I need to retire?” There is no single answer – everyone’s different. Several factors come into play when looking at a savings goal for retirement, including:

• • CPP/OAS amounts;
  • debt when entering retirement;
  • retirement lifestyle goals;
  • earned income plans (do you plan on working part-time in the early years of your retirement?);
  • whether you’re single or a couple at retirement;
  • your health and expected lifespan;
  • taxation of your retirement accounts; and so much more.

Also common is the assumption that your retirement savings shouldn’t suddenly stop earning investment gains for you the day you retire. In a good market in the early retirement years, there can be little capital depletion if the gains can meet the annual income needs.

 

2. “Just retire without a mortgage, and you’ll be fine,” and/or downsize your family home as part of your retirement plan

Given the cost of housing and the consumer debt levels of many Canadians, it’s no longer as realistic to retire mortgage-free as it was 20 years ago. Many people will refinance or upgrade their homes multiple times in their lives, and prioritizing your cash flow to your mortgage with the low interest rates we see doesn’t always make sense when it comes to your retirement. Being mortgage-free will lower your retirement lifestyle expenses; however, it may leave you cash-poor, or having to rely on your home equity to fund other lifestyle expenses in retirement. Likewise, the idea of “downsizing” often sees folks purchasing a smaller but higher-end condo or home with a pricetag that exceeds the sale price of their home, creating no additional cash proceeds and potentially even a small mortgage at that stage. This is where a balanced retirement savings plan can allow you to make effective long-term decisions about your personal finances.

 

3. Any investments should be very conservative (fixed income assets) once you’re retired

As important as considering taxation and inflation in your retirement income planning is, the rate of return on a retirement portfolio can make or break whether a retiree outlives their money. In the early years of retirement, maintaining an appropriate level of equities is imperative, especially for registered investments where there is a defined minimum withdrawal required annually.

 

4. Your retirement plan only needs to consider you and your spouse as empty nesters

Retirement income no longer has to simply support an empty nest, but as we see blended families, a generation of older parents, and adult children needing financial support from their parents longer than ever before, those retirement income dollars are stretched further than ever before. Consider how many parents and grandparents are financially supporting their adult children to the detriment of their retirement plans.

 

5. When to take CPP, or commute a workplace pension

Do you sit around and debate with others about whether or not to take your Canada Pension prior to age 65, or to wait until later, and the implications it’ll have on your retirement? There isn’t one answer, as it depends on what your other retirement assets are, along with other factors including lifespan, whether you’re still working past 65, and what your income earned is; how the stock market is performing; and how it would fit into your overall retirement plan. If you’re curious about when you should take your CPP, let’s talk!

 

Have questions, or are you ready to get serious about retirement saving? Check out some “out of the box” considerations for your retirement planning, and contact me for a no-obligation, complimentary chat.