Where your retirement income will actually come from

The Canada Pension Plan can start any time between 60 and 70. Starting at 60 reduces the benefit by 36%; waiting to 70 increases it by 42%, and the enhanced CPP introduced since 2019 will gradually lift the replacement rate from 25% to 33% of eligible earnings.

Because CPP is indexed to inflation and paid for life, delaying is effectively the cheapest longevity insurance available in Canada. The main reasons to take it early are poor health, a genuine need for cash, or wanting to protect GIS eligibility later.

Old Age Security is residency-based, not contribution-based: 40 years in Canada after 18 earns the full amount. Payments rise 10% at age 75, and deferral to 70 adds 0.6% per month.

OAS is subject to a 15% recovery tax on net income above the annual threshold. Managing taxable income around that line — using TFSA withdrawals, pension income splitting and careful RRIF timing — is one of the highest-value moves in retirement planning.

An RRSP must be converted to a RRIF (or an annuity) by the end of the year you turn 71, after which a minimum percentage must be withdrawn each year — about 5.28% at 71, rising with age. That minimum is taxable income whether you need it or not.

Many retirees benefit from drawing down RRSP balances in their 60s, before CPP, OAS and forced RRIF minimums stack on top of each other. Converting a small amount to a RRIF at 65 also unlocks the pension income credit and pension splitting with a spouse.

A defined benefit pension pays a formula-based amount for life and is usually the anchor of a retirement plan. A defined contribution pension or group RRSP is a savings pot with market risk that you convert to income yourself.

GICs are principal-protected deposits insured by CDIC up to $100,000 per category per member institution — useful for the first few years of spending, where market risk is least welcome. A GIC ladder smooths reinvestment risk.

TFSA withdrawals are the flexible piece: invisible to the OAS clawback and to GIS, they let you top up income in a year when taxable income is already near a threshold.

Coordinating CPP timing, OAS deferral, RRIF meltdowns, pension splitting and TFSA sequencing is genuinely complex, and the difference between a good and a mediocre order of withdrawals can be tens of thousands of dollars over a retirement.

An independent, fee-for-service retirement planner or CFP who does not earn commission on the products they recommend is the right person for this. Bring the output of the CPP/OAS estimator here as a starting point.