Planning for retirement is one of the most important financial steps you’ll ever take. Ensuring a stable and comfortable retirement means understanding where your income will come from once you’re no longer receiving a regular paycheque. In Canada, retirees have access to a variety of income sources—from government pension programs to personal savings and investments. Knowing how these sources work and how they can complement each other is key to building a retirement plan that supports your lifestyle and long-term goals.
Below, we explore the most common sources of income during retirement and how they can help you enjoy your later years with confidence and security.
1. Canada Pension Plan (CPP)
The Canada Pension Plan (CPP) is a foundational government program that provides monthly income to eligible Canadians who contributed during their working years. Both employees and employers contribute to the CPP, and the amount you receive in retirement depends on your contributions, earnings history, and the age you begin collecting benefits.
You can start receiving CPP payments as early as age 60 (at a reduced rate) or delay until age 70 to receive a higher benefit. CPP is now designed to replace up to 33.33% of your average earnings (up to a maximum limit), depending on your contribution history. For many Canadians, it forms a vital part of their retirement income.
2. Old Age Security (OAS)
Old Age Security (OAS) is another monthly benefit from the federal government, available to Canadians aged 65 and older who meet certain residency requirements. Unlike CPP, OAS is not based on your work history or contributions—it is funded by general tax revenues.
To receive full OAS benefits, you typically need to have lived in Canada for at least 40 years after the age of 18. Partial benefits are available to those with less residency. The OAS program also includes the Guaranteed Income Supplement (GIS) for low-income seniors, which can provide additional financial support.
Note: Higher-income individuals may see their OAS benefits reduced through the OAS Recovery Tax (commonly known as the clawback). In 2024, the clawback began when net income exceeded $90,997.
3. Employer Pension Plans
If you participated in a workplace pension, this can become a key income source in retirement. There are two primary types of employer pensions in Canada:
If you leave your employer before retirement, your vested pension may be transferred into a Locked-In Retirement Account (LIRA) or paid out as a commuted value. Understanding your employer pension and how it fits into your broader retirement strategy is essential for income planning.
4. Registered Retirement Savings Plans (RRSPs)
Explore our RRSP Calculator
RRSPs are a popular, tax-advantaged way for Canadians to save for retirement. Contributions are tax-deductible, and the investments inside the plan grow tax-deferred until withdrawal—typically in retirement when you may be in a lower tax bracket.
You can invest in a wide range of options within an RRSP, such as stocks, bonds, mutual funds, and ETFs. By the end of the year you turn71, your RRSP must be converted into a Registered Retirement Income Fund(RRIF) or used to purchase an annuity, or else the full amount becomes taxable as income.
5. Tax-Free Savings Accounts (TFSAs)
Try our TFSA Calculator
TFSAs are another excellent tool for retirement savings. Unlike RRSPs, contributions are not tax-deductible, but withdrawals—both contributions and investment growth—are completely tax-free.
This flexibility makes TFSAs ideal for supplementing retirement income, covering unexpected expenses, or funding discretionary activities like travel or hobbies. TFSAs also allow you to recontribute withdrawn amounts in future years, and your unused contribution room carries forward indefinitely.
6. Personal Savings and Investments
Beyond registered accounts, many retirees draw income from non-registered investments such as:
These sources provide additional financial flexibility and can be tailored to your risk tolerance and income needs. For example, rental properties may generate monthly income, while dividend-paying stocks can offer steady cash flow.
Note: Income from non-registered investments is taxable. Capital gains are taxed on 50% of the gain at your marginal tax rate, eligible dividends benefit from the dividend tax credit, and interest income is fully taxable.
7. Annuities
Annuities are insurance products that provide a guaranteed income stream for a set period or for life, in exchange for a lump-sum payment. They offer predictability and can be a good option for retirees who are concerned about outliving their savings.
There are several types of annuities, including:
Most annuities in Canada are fixed annuities and are regulated financial products sold by insurance professionals.
8. Government Assistance Programs
Beyond the Canada Pension Plan (CPP) and Old Age Security (OAS), several government programs provide additional support to Canadian retirees, especially those with lower incomes.
One key benefit is the Guaranteed Income Supplement (GIS).The GIS is a monthly, non-taxable payment provided to low-income seniors who are already receiving OAS. The amount you receive depends on your income and marital status, and it's designed to help cover basic living expenses for those with limited retirement income.
In addition to GIS, there are a range of federal and provincial assistance programs that aim to ensure financial stability for all retirees:
These programs are especially important for individuals who may not have significant personal savings or access to a workplace pension. If you’re unsure of what programs you may qualify for, working with a retirement advisor can help you explore all the resources available to you.
9. Home Equity
Your home is more than just a place to live—it can also be a valuable financial asset in retirement. Retirees may choose to:
Reverse mortgages in Canada are regulated financial products available to homeowners aged 55 and older, and can be a useful tool for those seeking to supplement their income without selling their home.
10. Part-Time Work or Self-Employment
Retirement doesn't always mean stopping work entirely. Many Canadians pursue part-time jobs, freelance gigs, or small business ventures after retiring from full-time careers. Whether for additional income or personal fulfillment, continuing to work on your own terms can boost your financial stability and enhance your quality of life.
Note: Additional income from work may affect your eligibility for income-tested benefits like GIS.
This kind of work can also help bridge income gaps if you retire before qualifying for government benefits or if you're looking to delay withdrawals from your retirement accounts.
Building a Strong Financial Plan
Retirement income planning is about more than just listing income sources. To build a strong plan, you should:
A diversified income strategy reduces risk and increases the likelihood that your income will keep pace with your lifestyle and longevity.
Building Your Retirement Future
A successful retirement is built on a foundation of multiple, well-planned income streams. By combining government benefits, employer pensions, registered accounts, personal investments, and even part-time work, you can create a retirement income strategy that is both flexible and resilient.
At Matco Financial, we help individuals plan for retirement with clarity and confidence. Whether you’re just beginning to think about retirement or already enjoying it, we can help you structure your income to support the retirement lifestyle you’ve worked so hard to build.
Our team is here to turn knowledge into results. Start building your financial future by speaking with an advisor.
