Ask MoneySense
I retired early at 58 and my wife is 56. We live on a Christmas tree farm that was paid off years ago.
I receive a work pension and my wife’s pension was bought out.
We have substantial RRSP savings, ongoing farm income, and farm property. Where do we begin to determine how much we can safely spend each month? We need a plan. My wife will start CPP at 60 and I will start CPP at 65.
How should we access our RRSPs? Are GICs a good option?
We’ve saved all our lives and managed our own investments. Now we need to convert savings into income — how do we do that? We have questions but no clear answers. Where can we find help to plan how to spend, rather than continue saving?
– Mike
Determining how much money you can spend in retirement
Mike, many people who spent decades building wealth struggle with the shift from saving to spending. The questions you’re asking are practical: how to access assets, how to structure withdrawals and how to be confident you won’t run out of money while still enjoying retirement.
The best starting point is a simple planning model you can run yourself or with a financial planner. A basic model helps you see the range of possibilities and make deliberate choices about spending, taxes and legacy goals. Here are the practical steps to create that model and use it to decide how much you can spend each month.
High-interest savings accounts can provide a safe place to hold short-term cash while you decide on long-term withdrawals.
Short-term guaranteed investments can preserve capital and provide predictable interest while you finalize long-term plans.
A temporary high-interest savings account can be useful for your emergency fund and planned spending over the next few years.
MoneySense has been helping Canadians with practical financial advice for many years. Our guidance is based on common planning practices and input from experienced personal finance professionals.
How to plan your retirement income in Canada
Begin with a net worth statement that lists all assets (accounts, property, pension values) and liabilities (mortgages, loans). Separate liquid assets — cash, high-interest savings, non-registered investments, and easily accessible accounts — from illiquid assets such as your home and farm property. Liquid assets are the funds you can draw on immediately for monthly spending.
Create an annual cash flow statement that itemizes expected income and expenses. Include predictable income sources: your work pension, CPP and any farm income. Then list fixed expenses (housing, insurance, property upkeep) and variable costs (travel, hobbies, entertainment). Doing this exercise often reveals how much you already spend and which categories might change in retirement.
Next, project those statements forward using reasonable assumptions: inflation, investment returns, taxes, and changes to income sources. You can do this in Excel, Google Sheets, or with software a financial planner might use. The goal is to see your projected income and net worth at future ages so you can evaluate sustainable spending levels.
One pattern many retirees see is that certain income sources rise at specific ages. For example, when you begin CPP and any public benefits, your cash flow will increase. Likewise, forced RRSP-to-RRIF conversions (and resulting minimum withdrawals) typically increase taxable income at the ages required by government rules. Consider how these timing events affect your ability and desire to spend.
When to do tax-planning strategies for retirement income
After you determine how you want to live and how much you want to spend, you can layer in tax-aware decisions. If your model shows that your wealth will continue to grow and you are likely to leave a large estate, you can explore strategies to use more of your assets during your lifetime — through spending, gifts to family, or charitable giving — while also considering tax consequences. The right approach depends on your goals, health expectations and family situation.
Run “what if” scenarios: find the maximum comfortable spending level if your aim is to exhaust most assets by the end of life, then test alternative goals such as leaving a set legacy or maintaining the farm for heirs. Each scenario will change the withdrawal rates you use and the asset mix you prefer.
Don’t worry at first about precise withdrawal mechanics or detailed tax timing. Focus on discovering what lifestyles are affordable. Once you have a clear spending target, you can refine tax planning — for example, choosing between systematic RRSP/RRIF withdrawals, partial lump-sum RRSP cash-outs, or building a ladder of guaranteed investments — to minimize taxes and preserve flexibility.
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How to model out retirement income
For many retirees the risk is not running out of money but rather leaving more than you intended while missing opportunities to enjoy retirement. A clear model helps balance those priorities. Update the model annually or whenever your circumstances change — new farm income, changes to health or major expenses — and compare results against actual cash flow.
Practical choices about RRSPs and GICs:
- Deciding how to access RRSPs: typical options include converting RRSPs to a retirement income fund (RRIF) and taking systematic withdrawals, cashing out portions (with tax consequences), or using guaranteed investments for part of your portfolio to smooth income.
- GICs and high-interest savings accounts: useful for holding funds you plan to spend within a few years, or for part of a laddered approach that staggers maturity dates to provide predictable income with low risk.
- Investment mix: keep enough liquid reserves for near-term spending and emergencies, maintain diversified investments for long-term growth, and use guaranteed products selectively to reduce volatility in years you need cash.
If managing these choices feels overwhelming, a qualified financial planner can help you build the model, run scenarios and recommend withdrawal strategies that align with your goals. You don’t need to do every calculation perfectly; you need a reliable process that produces realistic ranges for sustainable spending and gives you the confidence to enjoy retirement.
Further reading about retirement income
- What’s the average monthly retirement income in Canada?
- How to build a tax-efficient retirement income plan
- Planning for retirement with little or no savings
- Steps to structure retirement income for Canadians