What is a retirement savings gap?

A retirement savings gap is the difference between the retirement income needed to maintain your target lifestyle and the retirement income that your current savings, CPP, and OAS will produce. If projected income falls short of the target, the gap must be closed by saving more, spending less in retirement, or retiring later.

How much do I need to retire in Canada?

A common benchmark is 70% to 80% of pre-retirement gross income, though actual needs depend heavily on lifestyle, housing costs, health, and debts. Someone spending $80,000 per year before retirement may need $56,000 to $64,000 annually in retirement. Sources of income include CPP, OAS, employer pension, RRSP/RRIF drawdown, TFSA withdrawals, and other savings.

How much will I receive from CPP at retirement?

The maximum CPP retirement pension at age 65 in 2025 is $1,364.60 per month ($16,375 per year). The average new CPP recipient receives approximately $700 to $800 per month, reflecting incomplete contribution histories. CPP is indexed to the Consumer Price Index (CPI) each January. Your personalised CPP estimate is available through Service Canada's My Account.

How much is OAS in Canada in 2025?

The maximum Old Age Security (OAS) pension at age 65 is $727.67 per month ($8,732 per year) as of Q1 2026. OAS is fully indexed to CPI quarterly. The OAS clawback (recovery tax) begins at net income above $90,997 and fully eliminates OAS at approximately $148,065 (2025 thresholds). Deferring OAS past age 65 increases the pension by 0.6% per month, up to 36% at age 70.

How do I calculate how long my savings will last in retirement?

Savings duration = ln(1 - (balance x r / annual withdrawal)) / ln(1+r) x -1, where r is the annual real return. Alternatively, use the 4% rule of thumb: a portfolio can sustain 4% annual withdrawals (inflation-adjusted) for approximately 30 years at a historical balanced portfolio return. A $500,000 portfolio supports approximately $20,000/year in sustainable withdrawals under this guideline.

What is the RRSP contribution needed to close a retirement gap?

Annual savings needed = gap / ((((1+r)^n - 1) / r) x (1+r)), where gap is the present value of the shortfall, r is the annual return on savings, and n is the years until retirement. This is the annuity future value formula solved for the payment. The calculator automates this calculation. Canadian residents can use both RRSP and TFSA room to close the gap, with the RRSP providing a current-year deduction and the TFSA providing tax-free withdrawals.

Should I include CPP and OAS in my retirement income projection?

Yes. CPP and OAS are federal entitlements funded by contribution and residency requirements. Most Canadians receive both. The combined maximum CPP + OAS at age 65 is approximately $2,092 per month ($25,107/year) in early 2026. For a couple both receiving maximum benefits, combined government pension income is approximately $50,000/year, significantly reducing the portfolio drawdown requirement.

What is the safe withdrawal rate in Canada?

The widely used 4% rule originates from U.S. research (Bengen, 1994; Trinity Study, 1998). Canadian research suggests similar results for a balanced portfolio of Canadian equities and bonds over a 30-year period. Morningstar's 2024 State of Retirement Income report calculated a 3.7% to 4.0% starting withdrawal rate as safe for most portfolios targeting a 90% success rate over 30 years. A more conservative 3.5% rate adds a margin for sequence-of-returns risk.

How does early retirement affect my CPP?

Taking CPP before age 65 reduces the pension by 0.6% per month (7.2% per year). Taking it at 60 results in a 36% reduction versus the age-65 amount. Delaying CPP past 65 increases it by 0.7% per month (8.4% per year), up to 42% at age 70. Early retirement also means fewer contribution years and lower average pensionable earnings, which reduces the base CPP calculation before any early-take reduction is applied.

What is a RRIF withdrawal schedule?

A RRIF (Registered Retirement Income Fund) requires minimum annual withdrawals beginning in the year after conversion from an RRSP (mandatory by December 31 of the year the holder turns 71). The minimum withdrawal percentage begins at 5.28% at age 72 and increases each year to 20% at age 95+. Withdrawals are fully taxable as income. The 2015 budget reduced mandatory RRIF minimums; the 2024 budget further proposed reductions for ages 65 to 71 (pending implementation).

Canadian Retirement Savings Gap Calculator

Project your retirement savings against your required nest egg. Shows shortfall or surplus plus the additional annual contribution needed to close the gap.

Reviewed by Canadian Money Help Editorial Updated April 25, 2026 Source Service Canada CPP and OAS

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A retirement savings gap calculator determines whether current savings, combined with CPP, OAS, and any employer pension, will produce enough income to sustain a target retirement lifestyle. If projected income falls short, the calculator quantifies the additional annual savings needed to close the gap by the target retirement date.

Canadian Government Retirement Benefits (2025-2026)

Two federal income sources reduce the portfolio drawdown requirement for most Canadians:

Canada Pension Plan (CPP): Maximum retirement pension at age 65 is $1,364.60/month ($16,375/year) in 2025. The average new CPP recipient receives approximately $750/month. CPP is indexed to CPI annually (January adjustment). Taking CPP at 60 reduces it by 36%; deferring to 70 increases it by 42%.
Old Age Security (OAS): Maximum at age 65 is $727.67/month ($8,732/year) in Q1 2026, indexed quarterly to CPI. OAS clawback begins at net income above $95,323. Deferring OAS to age 70 increases it by 36%.

A couple both receiving maximum CPP at 65 and maximum OAS receives approximately $50,200/year in combined government benefits, significantly reducing the required portfolio drawdown.

Retirement Income Target

A 70% income replacement rate is a common planning benchmark. It reflects that some working-life expenses disappear in retirement: commuting costs, professional clothing, CPP/EI contributions, RRSP contributions, and potential mortgage payoff. Higher lifestyle expectations or earlier retirement increase the required replacement rate.

Required Portfolio Size

Required portfolio = annual income gap / safe withdrawal rate. The 4% safe withdrawal rate implies a portfolio of 25 times the annual gap. Example: if the income gap after CPP and OAS is $25,000/year, the required portfolio at retirement is $625,000. At a 3.5% withdrawal rate (more conservative), the required portfolio is $714,286.

Annual Savings to Close the Gap

If current savings are insufficient, additional annual contributions are needed. The required annual contribution uses the future value of an annuity formula:

PMT = (FV − PV × (1+r)ⁿ) × r / ((1+r)ⁿ − 1)

Where FV is the target portfolio, PV is the current savings balance, r is the expected annual investment return (net of fees), and n is the years until retirement.

RRSP vs. TFSA for Gap Closure

Both RRSP and TFSA contributions reduce the retirement gap. RRSP contributions generate a current-year tax deduction, reducing after-tax cost of contributing, but withdrawals are fully taxable. TFSA contributions use after-tax dollars but withdrawals are tax-free. The optimal split depends on current vs. expected retirement marginal tax rate: if retirement income will be taxed at a lower rate than current income, RRSP is more advantageous; if similar or higher, TFSA is preferred.

RRIF Minimum Withdrawals

RRSP must be converted to a RRIF, annuity, or registered income plan by December 31 of the year the holder turns 71. RRIF minimum withdrawals begin the following year. The minimum rate at age 72 is 5.28% of the January 1 RRIF balance, rising annually. These forced withdrawals must be factored into the retirement income projection as taxable income.

Source

Service Canada CPP benefit rates (2025); Service Canada OAS rates (Q1 2026); ITA s.146.3 (RRIF minimum withdrawal schedule); Morningstar State of Retirement Income 2024; Bengen (1994) safe withdrawal rate research.

Frequently asked questions

What is a retirement savings gap?: A retirement savings gap is the difference between the retirement income needed to maintain your target lifestyle and the retirement income that your current savings, CPP, and OAS will produce. If projected income falls short of the target, the gap must be closed by saving more, spending less in retirement, or retiring later.
How much do I need to retire in Canada?: A common benchmark is 70% to 80% of pre-retirement gross income, though actual needs depend heavily on lifestyle, housing costs, health, and debts. Someone spending $80,000 per year before retirement may need $56,000 to $64,000 annually in retirement. Sources of income include CPP, OAS, employer pension, RRSP/RRIF drawdown, TFSA withdrawals, and other savings.
How much will I receive from CPP at retirement?: The maximum CPP retirement pension at age 65 in 2025 is $1,364.60 per month ($16,375 per year). The average new CPP recipient receives approximately $700 to $800 per month, reflecting incomplete contribution histories. CPP is indexed to the Consumer Price Index (CPI) each January. Your personalised CPP estimate is available through Service Canada’s My Account.
How much is OAS in Canada in 2025?: The maximum Old Age Security (OAS) pension at age 65 is $727.67 per month ($8,732 per year) as of Q1 2026. OAS is fully indexed to CPI quarterly. The OAS clawback (recovery tax) begins at net income above $95,323 and fully eliminates OAS at approximately $148,065 (2025 thresholds). Deferring OAS past age 65 increases the pension by 0.6% per month, up to 36% at age 70.
How do I calculate how long my savings will last in retirement?: Savings duration = ln(1 – (balance x r / annual withdrawal)) / ln(1+r) x -1, where r is the annual real return. Alternatively, use the 4% rule of thumb: a portfolio can sustain 4% annual withdrawals (inflation-adjusted) for approximately 30 years at a historical balanced portfolio return. A $500,000 portfolio supports approximately $20,000/year in sustainable withdrawals under this guideline.
What is the RRSP contribution needed to close a retirement gap?: Annual savings needed = gap / ((((1+r)^n – 1) / r) x (1+r)), where gap is the present value of the shortfall, r is the annual return on savings, and n is the years until retirement. This is the annuity future value formula solved for the payment. The calculator automates this calculation. Canadian residents can use both RRSP and TFSA room to close the gap, with the RRSP providing a current-year deduction and the TFSA providing tax-free withdrawals.
Should I include CPP and OAS in my retirement income projection?: Yes. CPP and OAS are federal entitlements funded by contribution and residency requirements. Most Canadians receive both. The combined maximum CPP + OAS at age 65 is approximately $2,092 per month ($25,107/year) in early 2026. For a couple both receiving maximum benefits, combined government pension income is approximately $50,000/year, significantly reducing the portfolio drawdown requirement.
What is the safe withdrawal rate in Canada?: The widely used 4% rule originates from U.S. research (Bengen, 1994; Trinity Study, 1998). Canadian research suggests similar results for a balanced portfolio of Canadian equities and bonds over a 30-year period. Morningstar’s 2024 State of Retirement Income report calculated a 3.7% to 4.0% starting withdrawal rate as safe for most portfolios targeting a 90% success rate over 30 years. A more conservative 3.5% rate adds a margin for sequence-of-returns risk.
How does early retirement affect my CPP?: Taking CPP before age 65 reduces the pension by 0.6% per month (7.2% per year). Taking it at 60 results in a 36% reduction versus the age-65 amount. Delaying CPP past 65 increases it by 0.7% per month (8.4% per year), up to 42% at age 70. Early retirement also means fewer contribution years and lower average pensionable earnings, which reduces the base CPP calculation before any early-take reduction is applied.
What is a RRIF withdrawal schedule?: A RRIF (Registered Retirement Income Fund) requires minimum annual withdrawals beginning in the year after conversion from an RRSP (mandatory by December 31 of the year the holder turns 71). The minimum withdrawal percentage begins at 5.28% at age 72 and increases each year to 20% at age 95+. Withdrawals are fully taxable as income. The 2015 budget reduced mandatory RRIF minimums; the 2024 budget further proposed reductions for ages 65 to 71 (pending implementation).

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Methodology

Gap = retirement income needed - (CPP + OAS + pension). Required portfolio = gap / SWR. Annual savings = (target portfolio - current savings*(1+r)^n) * r / ((1+r)^n - 1).

Frequently asked questions

What is a retirement savings gap?: A retirement savings gap is the difference between the retirement income needed to maintain your target lifestyle and the retirement income that your current savings, CPP, and OAS will produce. If projected income falls short of the target, the gap must be closed by saving more, spending less in retirement, or retiring later.
How much do I need to retire in Canada?: A common benchmark is 70% to 80% of pre-retirement gross income, though actual needs depend heavily on lifestyle, housing costs, health, and debts. Someone spending $80,000 per year before retirement may need $56,000 to $64,000 annually in retirement. Sources of income include CPP, OAS, employer pension, RRSP/RRIF drawdown, TFSA withdrawals, and other savings.
How much will I receive from CPP at retirement?: The maximum CPP retirement pension at age 65 in 2025 is $1,364.60 per month ($16,375 per year). The average new CPP recipient receives approximately $700 to $800 per month, reflecting incomplete contribution histories. CPP is indexed to the Consumer Price Index (CPI) each January. Your personalised CPP estimate is available through Service Canada's My Account.
How much is OAS in Canada in 2025?: The maximum Old Age Security (OAS) pension at age 65 is $727.67 per month ($8,732 per year) as of Q1 2026. OAS is fully indexed to CPI quarterly. The OAS clawback (recovery tax) begins at net income above $90,997 and fully eliminates OAS at approximately $148,065 (2025 thresholds). Deferring OAS past age 65 increases the pension by 0.6% per month, up to 36% at age 70.
How do I calculate how long my savings will last in retirement?: Savings duration = ln(1 - (balance x r / annual withdrawal)) / ln(1+r) x -1, where r is the annual real return. Alternatively, use the 4% rule of thumb: a portfolio can sustain 4% annual withdrawals (inflation-adjusted) for approximately 30 years at a historical balanced portfolio return. A $500,000 portfolio supports approximately $20,000/year in sustainable withdrawals under this guideline.
What is the RRSP contribution needed to close a retirement gap?: Annual savings needed = gap / ((((1+r)^n - 1) / r) x (1+r)), where gap is the present value of the shortfall, r is the annual return on savings, and n is the years until retirement. This is the annuity future value formula solved for the payment. The calculator automates this calculation. Canadian residents can use both RRSP and TFSA room to close the gap, with the RRSP providing a current-year deduction and the TFSA providing tax-free withdrawals.
Should I include CPP and OAS in my retirement income projection?: Yes. CPP and OAS are federal entitlements funded by contribution and residency requirements. Most Canadians receive both. The combined maximum CPP + OAS at age 65 is approximately $2,092 per month ($25,107/year) in early 2026. For a couple both receiving maximum benefits, combined government pension income is approximately $50,000/year, significantly reducing the portfolio drawdown requirement.
What is the safe withdrawal rate in Canada?: The widely used 4% rule originates from U.S. research (Bengen, 1994; Trinity Study, 1998). Canadian research suggests similar results for a balanced portfolio of Canadian equities and bonds over a 30-year period. Morningstar's 2024 State of Retirement Income report calculated a 3.7% to 4.0% starting withdrawal rate as safe for most portfolios targeting a 90% success rate over 30 years. A more conservative 3.5% rate adds a margin for sequence-of-returns risk.
How does early retirement affect my CPP?: Taking CPP before age 65 reduces the pension by 0.6% per month (7.2% per year). Taking it at 60 results in a 36% reduction versus the age-65 amount. Delaying CPP past 65 increases it by 0.7% per month (8.4% per year), up to 42% at age 70. Early retirement also means fewer contribution years and lower average pensionable earnings, which reduces the base CPP calculation before any early-take reduction is applied.
What is a RRIF withdrawal schedule?: A RRIF (Registered Retirement Income Fund) requires minimum annual withdrawals beginning in the year after conversion from an RRSP (mandatory by December 31 of the year the holder turns 71). The minimum withdrawal percentage begins at 5.28% at age 72 and increases each year to 20% at age 95+. Withdrawals are fully taxable as income. The 2015 budget reduced mandatory RRIF minimums; the 2024 budget further proposed reductions for ages 65 to 71 (pending implementation).