Once, many Canadian workers could count on a workplace pension as the foundation of their retirement plan. Today, pension coverage has fallen: in 2021 only about 38% of workers had a registered pension plan, leaving most people to assemble their own retirement income from various sources.
Newcomers to Canada face particular challenges when planning for retirement. Many economic immigrants arrive in their late 20s or early 30s and often confront hurdles that make saving for later life harder:
- Depleted savings: Newcomers frequently use much of their savings to cover initial costs—moving, housing deposits, setting up a household and other start-up expenses—so they begin saving for retirement later than those born and raised in Canada.
- Lower initial earnings: Without Canadian work experience, newcomers may have to restart their careers at a lower level or accept lower-paying positions, which reduces the capacity to save and contributes to a slower climb up the income ladder.
- Limited familiarity with the system: Understanding Canada’s tax and financial rules, and how to make the most of programs such as the CPP, OAS, RRSP and TFSA, takes time. That learning curve can delay optimal retirement planning.
- Less registered contribution room: Arriving later in life means fewer years to contribute to CPP, and less RRSP and TFSA room compared with peers who have worked in Canada longer. As a result, newcomers often rely more on non-registered savings and investments, which are typically less tax-efficient.
There is encouraging news: Canada’s retirement programs apply equally to all eligible residents. With clear guidance and consistent planning, newcomers can still build a solid retirement plan.
How to begin retirement planning as a newcomer
To get started, focus on four core questions:
- How much income will you need in retirement? A simple rule is to target 70%–80% of your current income as an estimate. For instance, someone earning $75,000 today might aim for roughly $52,500 a year in today’s dollars. You can refine this number by listing likely expenses in retirement and adjusting for your planned lifestyle.
- How much will government programs provide? Estimate expected income from the Canada Pension Plan (CPP), Old Age Security (OAS) and any income-tested supplements. Many calculators and government tools can help estimate future payments and eligibility. Some countries have social-security agreements with Canada that can affect eligibility for benefits—check whether any such agreement applies to you.
- What will you receive from employer plans? If your workplace offers a pension or a group registered plan (for example, a group RRSP), estimate its projected value at retirement. Compound interest calculators can help convert current contributions into future values based on assumed returns.
- How will you cover any shortfall? For most people, CPP, OAS and employer plans won’t fully cover retirement needs. You’ll likely need to fill the gap with personal investments—held inside RRSPs or TFSAs when possible—or with other income sources such as rental property or business income.
Sample retirement cash flow for a 35-year-old (retiring at 65)
The table below shows a hypothetical example of retirement income sources and the resulting shortfall a 35-year-old might face when retiring at 65. These figures are illustrative; use personal calculations and planning tools to estimate your own needs.
| Amount (today’s value) | Amount (inflation adjusted) | ||
|---|---|---|---|
| A | Amount needed | $52,500 | $127,400 |
| B | Government pension and benefits (CPP, OAS, GIS) | $22,000 | $53,400 |
| C | Employer-sponsored plan (group RRSP) | $8,000 | $19,400 |
| D | B + C | $30,000 | $72,800 |
| E | Shortfall (A – D) | $22,500 | $54,600 |
| F | Needed value of investments at retirement (E ÷ 4% rule) | $562,500 | $1,365,000 |
| G | Monthly investment required from now until retirement | $969 |
In this scenario, the individual faces an annual retirement shortfall of $22,500. To cover that gap, they would need a portfolio worth roughly $562,500 at retirement (using the 4% withdrawal rule). Assuming a 30-year horizon and an average annual return of 8%, the person would need to save approximately $969 per month. Strategies to meet this need include disciplined investing, real estate income and earnings from a side business.
Build your own retirement portfolio
A tax-efficient approach to closing a retirement shortfall is to assemble an investment portfolio tailored to your goals. You can hold investments inside registered accounts such as RRSPs and TFSAs, which offer tax benefits, or in non-registered accounts that have no contribution limits but lack tax advantages. Because newcomers often begin accumulating TFSA and RRSP room later, it’s important to use available contribution space strategically.
TFSA contribution room begins when you become a resident of Canada, and RRSP room is earned based on prior-year employment or self-employment income. You can find your registered-account limits on tax documents issued by the Canada Revenue Agency after you file your return. Use calculators to track TFSA and RRSP room and plan contributions accordingly.
After maximizing registered accounts, consider non-registered investments for additional growth. Diversify across asset classes—stocks, bonds, index funds and potentially real estate—aligned with your risk tolerance and retirement timeline.
Consider building other income sources
- Rental income: Purchasing a second property and renting it out can generate steady income that often keeps pace with inflation, since rents tend to rise over time. However, property prices in major Canadian cities can be high relative to incomes, which affects affordability and potential returns.
- Small-business income: A side business—consulting, freelancing or a home-based enterprise—can increase your current income and expand RRSP contribution room if it produces earned income. With careful succession and sales planning, a business might also provide a lump-sum or ongoing income at retirement.
For newcomers, effective retirement planning means combining government benefits, employer plans and personal savings while exploring additional income streams. With consistent saving, informed decisions and the right use of registered accounts, newcomers can make meaningful progress toward a secure retirement.
Further reading on retiring without a pension
- 30 and no pension
- 40 and no pension: what to do
- Single parent and no pension
- Dealing with a small pension