How to Plan Retirement When You Have Little or No Savings

Many Canadians intend to save for retirement but, due to careers interrupted by low pay, caregiving, unemployment, or other financial strains, end up with little in the way of personal savings. When retirement arrives with limited savings, it can feel overwhelming—but there are dependable public benefits and practical strategies that can form a foundation for a secure retirement even on a tight budget.

Retiring with modest or no savings is challenging, but it is possible to build a workable retirement income plan by combining public pensions, targeted benefits, careful withdrawal strategies, and, if appropriate, home equity.

Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) is a primary source of retirement income for Canadians who have worked and contributed during their careers. Designed to replace a portion of career earnings, CPP aims to replace about 25% of average lifetime earnings up to a yearly maximum; the CPP enhancement launched in 2019 is gradually increasing that replacement rate toward 33% over time.

In 2024 the maximum CPP retirement pension at age 65 is $1,365 per month (up to $16,375 per year). Most retirees receive far less than the maximum because their lifetime contributions were lower—October 2023 data showed the average CPP payment was about $758 per month (roughly 58% of the maximum). You can request a CPP Statement of Contributions from Service Canada to estimate the pension you are likely to receive.

CPP benefits may begin as early as age 60 or be deferred until age 70. Starting later increases your monthly payment. Because inflation and cost-of-living adjustments apply, timing your CPP start date depends on personal factors such as health, work plans, other income sources, and your need for cashflow in retirement.

Old Age Security (OAS) and the Guaranteed Income Supplement (GIS)

In addition to CPP, most retirees receive Old Age Security (OAS). OAS is not tied to work history but to residency: long-term Canadian residents can qualify for the OAS pension. As of the first quarter of 2024, the maximum OAS payment at age 65 is $713 per month (about $8,565 per year). A 2022 change raises OAS by 10% for pensioners aged 75 and over; for a 75-year-old who started OAS at 65, the maximum in early 2024 is $785 per month (about $9,416 per year). OAS payments are adjusted quarterly for inflation.

OAS can be taken anytime between 65 and 70. Delaying OAS increases payments by 0.6% per month (7.2% per year), which yields a larger monthly cheque but for fewer years overall. For low-income retirees who are no longer working, claiming OAS at 65 is often the best option because of the Guaranteed Income Supplement (GIS).

GIS is a tax-free monthly benefit for OAS recipients with low incomes. For a single retiree with income below $21,624 (excluding OAS) the maximum GIS in the first quarter of 2024 is $1,065 per month ($12,786 per year). For couples, eligibility and maximum amounts vary depending on whether both partners receive full OAS. If both receive full OAS, the combined income limit is $28,560 (excluding OAS) with a maximum of $641 per person per month ($7,696 annually). If one spouse is not receiving OAS, the threshold rises to $51,840 (excluding OAS) with a $1,065 monthly maximum for the eligible partner. Keep in mind that any taxable income aside from OAS reduces GIS amounts.

Combining CPP, OAS and GIS can create a meaningful baseline income. For example, a single retiree age 65 entitled to the maximum CPP and eligible for OAS might receive $16,375 from CPP, $8,565 from OAS, and an estimated $2,621 from GIS—totaling about $27,561 per year, or roughly $2,297 per month. Depending on provincial taxes and available credits, such income could mean little to no federal tax payable for some retirees.

Other forms of retirement income

Besides CPP, OAS and GIS, retirees may qualify for additional federal or provincial benefits that are often tax-free. Eligibility for many of these programs is determined through annual tax filings. It’s important to identify and apply for all benefits you are entitled to, because even modest extra income can make a meaningful difference.

Private savings—RRSPs, TFSAs, and non-registered accounts—also play a role. How much those savings contribute depends on the balance at retirement and a sustainable withdrawal plan. As a rough guideline, many advisers suggest an initial withdrawal rate in the 3%–4% range at age 65, though the right rate depends on your risk tolerance, fees, and life expectancy.

With $10,000 saved, a 3%–4% withdrawal produces only $300–$400 per year (about $25–$33 per month). With $50,000, withdrawals at that rate yield about $1,500–$2,000 per year ($125–$167 per month). With $100,000 saved, withdrawals would be roughly $3,000–$4,000 per year ($250–$333 per month). These are rough examples; tax consequences depend on the account types. Low-income retirees may incur little or no tax on withdrawals, and TFSAs may be particularly attractive because withdrawals are tax-free and do not affect eligibility for income-tested benefits.

Home equity is another resource many retirees consider. Options include downsizing, selling and renting, borrowing against home equity with a secured line of credit, or using a reverse mortgage. While conventional retirement planning often focuses on financial assets first, converting home equity into income can be a practical choice for those with limited savings.

Anyone approaching retirement, especially those with small savings, should assess their income sources against expected spending. If possible, speak to a financial professional or use reputable online tools to estimate CPP, OAS and GIS entitlements and to map out a realistic income plan. Understanding government benefits and alternative income sources like home equity is essential when personal savings are limited.

More on retirement:

• Earning, saving and spending money in Canada: A guide for new immigrants
• Financial planning in your 70s
• Where do we pay income tax if we retire abroad?