Secure retirement

Since 1957, the Registered Retirement Savings Plan (RRSP) has long been associated with retirement in Canada. However, very few realize it’s certainly not mandatory.

Canada Pension Plan (CPP) and Old Age Security (OAS) are two government pensions. For those over 65 years of age, the maximum annual combined CPP/OAS pensions is currently $20,770. However, the average is only $15,159.

OAS is easier to qualify for than CPP because it’s based on years of residency. Canadian residents who have lived in the country for at least 40 years and are between 18 and 65 qualify for the maximum. However, if your income at 65 (or older) exceeds $75,910 for a particular year, then you will be hit with a recovery tax or clawback, reducing your OAS for the subsequent year.

For some, the Tax Free Savings Account (TFSA) could be a far better option than an RRSP. This is particularly true for those with modest or low incomes. The reasoning is simple. Any earned interest, dividend income, or appreciation of stocks held inside a TFSA is tax-free, while withdrawals from your RRSP will be taxed — reducing your available income.

You might also consider investing in rental real estate instead of an RRSP. Meaning, instead of making contributions to an RRSP, you would make mortgage payments instead. RRSP usually is about investing in stocks, but in this case it’s about investing in real estate that appreciates. So, instead of collecting dividends you are collecting rental income.

The whole point I am making is that RRSP is not mandatory. And although relying on CPP/OAS is a nice supplement it is typically not enough for most to retire on. So thankfully there are other options available to Canadians for a comfortable retirement.


  1. @erica that’s a valid point but I can think of a few reasons not to have an RRSP. It depends on the situation.

  2. To be honest, life would be made a lot easier if you did retire with an RRSP. Does it mean you need one, surely not. But why would one want to limit their options. Better to save something in an RRSP, which is essentially deferred taxes, than to not.

    Just my two cents.

  3. This is news to me. I personally think its very important to begin to save through an RRSP asap. Even if one is too late to the party. Better late than never.

  4. I've been saving since i was 18. I'm now 35. Average earnings per year 5%.

  5. Interesting. I had the same thoughts. I have been saving in my TFSA instead of RRSP for some time. I have heard the withholding tax was a bit much and seeing as how i like to take out at any time it makes more sense to me to use tfsa for my retirement plan instead.

  6. Anyone know how CPP applies if you are a small business owner?

  7. Just don't forget that RRSP is where you have your foreign stocks that have dividends. You don't want them in your TFSA since the IRS applies taxes to it. Only RRSP does not.

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