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BeginnerBudgeting5 min read
Retirement Planning for Young Canadians: It's Not as Far Away as You Think
Retirement feels distant when you're in your 20s, but the decisions you make now determine whether you retire comfortably or struggle. Here's the full picture.
- 1Generation gap: baby boomers had defined-benefit pensions; most millennials and Gen Z will rely on defined-contribution plans and personal savings.
- 2A defined-benefit (DB) pension guarantees a set monthly payout in retirement based on salary and years of service — the employer bears the investment risk.
- 3A defined-contribution (DC) plan or group RRSP means you (and your employer) contribute, but the final payout depends on investment performance — you bear the risk.
- 4CPP (Canada Pension Plan): the maximum monthly payout in 2024 is ~$1,364 at age 65, but the average is closer to $750. It's a foundation, not a full income.
- 5OAS (Old Age Security): up to ~$700/month at age 65, funded by general tax revenue. It's clawed back if your income exceeds ~$86,000.
- 6GIS (Guaranteed Income Supplement) supplements OAS for low-income seniors — up to ~$1,000/month additional.
- 7The 4% rule: you can safely withdraw 4% of your retirement savings annually with a high probability of never running out. $500,000 saved = ~$20,000/year.
- 8To replace 70% of a $60,000 pre-retirement income for 30 years, you need roughly $750,000–$900,000 in savings (in addition to CPP/OAS).
- 9Start in your 20s: saving $300/month from age 25 to 65 at 7% return = ~$780,000. Start at 35 and you'd need to save ~$650/month for the same result.
- 10Retirement isn't just about money — plan for healthcare costs, housing decisions, and lifestyle. Long-term care in Canada can cost $2,000–$5,000+/month.