Why there is no single number
Surveys regularly report that Canadians believe they need well over a million dollars to retire. That figure describes what people fear, not what retirement actually costs. A universal number cannot know whether your mortgage is paid off, whether you have a workplace pension, whether you will retire at 58 or 68, or whether you live in downtown Toronto or rural Nova Scotia.
Real spending tells a calmer story. Statistics Canada data puts the average after-tax income of senior families at roughly $74,000 a year, and typical senior couples spend meaningfully less than headline retirement numbers suggest. The honest answer, it depends on your spending, is more useful than a scary round number, because it points you at something you can actually measure.
Start with spending, not a savings target
The real driver of your retirement number is what you spend each month after tax. Not your salary, not a survey figure: the actual cost of your life once work ends. Housing, food, cars, travel, gifts, insurance and the small stuff that adds up.
Take your realistic monthly spending and multiply by 12. That yearly figure is what your retirement income, from all sources combined, has to deliver after tax. Everything else in retirement planning is just arranging where that money comes from and how much tax gets taken on the way.
What CPP and OAS cover first
Before your savings pay for anything, government benefits cover the first layer. In 2026 the maximum CPP at 65 is $1,507.65 a month and the maximum OAS is $743.05 a month for ages 65 to 74. One person receiving both maximums gets about $2,250 a month, roughly $27,000 a year, before tax. Most people receive less than the CPP maximum, so a typical single retiree gets somewhat under that.
A couple can double the figure if both partners reach the maximums, which is uncommon, so think of roughly $54,000 a year as the ceiling for two people, not the norm. For lower-income retirees there is also the Guaranteed Income Supplement, worth up to $1,105.43 a month for a single person in early 2026, though it is income-tested and shrinks as other income rises.
| Household | At the maximums | Per year |
|---|---|---|
| One person | about $2,250 a month | roughly $27,000 |
| Couple, both at maximums | about $4,500 a month | roughly $54,000 |
The gap your savings must fill, after tax
Subtract what CPP and OAS will pay you from what you spend. Whatever is left is the gap your own savings must produce, year after year, for as long as you live. That gap, not a survey number, is your retirement number.
One catch matters more than any other: the gap is measured in after-tax dollars, but most retirement savings are not. A $500,000 RRSP is not $500,000 of spending money, because every dollar withdrawn is taxed as income. TFSA withdrawals, by contrast, arrive tax free. Two households with identical account balances can have very different amounts of real spending money, depending on which accounts hold the savings and how the withdrawals are timed.
The rules of thumb, and where each one misleads
Two shortcuts come up constantly. Both are worth understanding, and neither is worth obeying.
- The 70% rule says plan for 70% of your pre-retirement income. It misleads because it starts from income rather than spending: a family that saved heavily and paid off the house may live well on 50%, while a renter with expensive plans may need 90%.
- The 4% rule says you can withdraw 4% of your savings in the first year, raise it with inflation and rarely run out, which implies needing about 25 times your yearly gap. It comes from historical US market studies and ignores Canadian tax as well as CPP and OAS timing. Planners working from FP Canada style guidance now use more conservative assumptions than the era that produced it.
- Used loosely, either rule gives a rough starting point. Used as a target, both can point a real household at the wrong number in either direction.
Why your number moves
Your retirement number is not fixed, because the inputs are choices. Retiring at 60 instead of 65 adds five more years your savings must cover before benefits ramp up. CPP can start anywhere from 60 to 70 and OAS from 65 to 70, and each start age changes both the monthly amount and the size of your gap in every year. In a couple, one partner retiring earlier than the other changes the picture again, because one salary keeps covering spending while the other stops.
Then there is how long the money must last. Nobody knows their own lifespan, so careful planning runs the projection to age 95 rather than to an average life expectancy. Planning to 95 means the plan still works if you are one of the many people who live longer than average, which is the whole point of a plan.
A worked example
Nadia and Paul are both 65 and spend $5,500 a month, which is $66,000 a year after tax. Each receives OAS near the maximum of $743.05 a month, and each receives CPP of about $630, below the maximum like most people. Together that is roughly $2,750 a month from government benefits, about $33,000 a year, covering half their spending.
The other $33,000 a year must come from their own savings, after tax. Planning to age 95 means 30 years of that gap: 30 times $33,000 is $990,000 of after-tax spending money over the whole plan. That is an illustration of the arithmetic, not a savings target. Investment growth means they do not need $990,000 sitting in accounts on day one, and because much of their money is in RRSPs, they must withdraw more than $33,000 in pre-tax dollars to net that amount.
Calculated with the same 2026 CRA rules the TruePath engine applies.
How TruePath shows this
TruePath builds this calculation from your actual spending rather than a rule of thumb. It projects your CPP, OAS and account withdrawals year by year to age 95, applies each year's tax and shows whether the plan holds or where it runs short. The default assumptions align with FP Canada's 2026 guidance: a 4% net investment return and 2.5% inflation. Change your retirement age, a CPP start age or your monthly spending and the whole projection updates, so you can watch your own number move instead of guessing at someone else's.
Related questions people ask
Is $1.7 million really what Canadians need to retire?
That figure comes from surveys asking Canadians what they believe they need, not from measuring what retirement costs. Surveys regularly report that Canadians believe they need well over a million dollars, yet Statistics Canada data shows typical senior couples spend meaningfully less than headline numbers suggest. Your own after-tax spending is a far better guide than a belief statistic.
Is the 70% income replacement rule reliable?
It is a rough shortcut, not a rule of nature. It starts from your income, but retirement costs are driven by your spending. A household that saved a large share of its income and paid off the mortgage may need well under 70%, while a renter with big travel plans may need more. Working from actual monthly spending removes the guesswork.
Does the 4% withdrawal rule still work?
It gives a rough sense of scale: needing about 25 times your yearly income gap. But it was built on historical US market returns and ignores Canadian tax, account types and CPP and OAS timing. Planning based on FP Canada style guidance now uses more conservative assumptions, which is why year-by-year projections have largely replaced the shortcut.
How much do CPP and OAS pay in 2026?
The maximum CPP at 65 is $1,507.65 a month and the maximum OAS is $743.05 a month for ages 65 to 74. One person at both maximums gets about $2,250 a month, roughly $27,000 a year, before tax. Most people receive less than the CPP maximum, so treat those figures as a ceiling rather than an expectation.
Do I need less if my home is paid off?
Usually the gap is smaller, yes. A paid-off home removes the largest monthly cost most households carry, which lowers after-tax spending and therefore the amount your savings must produce. This is exactly why income-based rules of thumb mislead: two households with the same salary but different housing situations need very different amounts.
Sources
This page is general education about Canadian retirement rules, not personalised financial advice. Figures are for the 2026 tax year and change with government updates.