How to plan your income sources in retirement

Take stock of your RRSP, annuities, benefits, and whether you want to rely on your home as a source of retirement income

You probably already know that retirement takes planning. This includes knowing how much you need to save before you retire as well as where your income is going to come from.

On this page we answer:

What investments can be a source of retirement income?

Many Canadians rely on multiple sources of income during their retirement years, including personal savings and investments.

1. Registered Retirement Income FundRegistered Retirement Income Fund A plan that holds your retirement savings and provides income after you retire. It works like an RRSP in reverse because you withdraw money instead of saving. There are rules about how much you can withdraw each year.+ read full definition (RRIFRRIF See Registered Retirement Income Fund.+ read full definition)

If you contribute to a Registered Retirement Savings PlanRegistered Retirement Savings Plan A plan that lets you save for retirement while lowering your income taxes. You choose how you want to invest your savings. You don’t pay tax on any money in your account until you take it out.+ read full definition (RRSPRRSP See Registered Retirement Savings Plan.+ read full definition), you’ll need to close the RRSP by the age of 71. The funds can be withdrawn into cash or converted to a RRIF. The advantage of contributing to an RRSP before you retire is that you will receive a tax deductionTax deduction A cost that you can deduct from your income when you file your taxes. This lowers the tax that you owe. For example, if you contribute $5,000 to your RRSP, you can deduct $5,000 from your income when you file your taxes.+ read full definition for the contributions, and it will not be considered taxable incomeTaxable income The amount of income you have to pay tax on, after tax credits and deductions.+ read full definition until you withdraw the money. If you expect to be in a lower income bracket in retirement, then RRSPs — later converted to a RRIF — may be a good choice for you.

Just as in an RRSP, your savings grow tax-freeTax-free Money that you do not pay tax on.+ read full definition while they’re in a RRIF and you can choose how to investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition your money within the plan. You do have to withdraw a minimum amount each year, which is considered taxable income. Learn more about RRIFs.

2. TaxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition Free Savings AccountSavings account A bank account intended for depositing funds. Pays interest and lets you withdraw cash at any time.+ read full definition (TFSATFSA See Tax-Free Savings Account.+ read full definition)

Many Canadians contribute to a TFSA as well as, or instead of, an RRSP. The TFSA can be used for any kind of savings goal and can hold most types of investments. One advantage to using a TFSA is that withdrawals from TFSAs are not taxed. This is because your TFSA contributions are made with after-taxAfter-tax The money you have left after you pay taxes on money that you made working or investing.+ read full definition income, unlike RRSP contributions which usually result in tax deductions.

3. Annuities

An annuityAnnuity A contract usually sold by life insurance companies that guarantees an income to you or your beneficiary at some time in the future. An annuity is a contract with a life insurance company. When you buy an annuity, you deposit a lump sum of money, and the insurance company agrees to pay you a guaranteed…+ read full definition is a contractContract A binding written or verbal agreement that can be enforced by law.+ read full definition with a life insurance companyInsurance company A company that sells insurance products. Some companies sell only life insurance. Some sell only property insurance. Others sell all types of insurance.+ read full definition. You invest a lump sum of money, and they agree to pay you a guaranteed income over a set period of time, or for the rest of your life. Annuities are commonly used to generate retirement income.

Annuities allow you to convert your savings into a guaranteed monthly income. No matter what the markets do, your income will never change. You can choose a termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition-certain annuity (monthly payments for a set number of years) or a life annuityLife annuity A life annuity gives you a guaranteed regular income for life. Payments usually stop when you die, and no money will go to your estate. You may choose to add an option that allows your spouse, beneficiary or estate to continue to receive your payments after your death.+ read full definition (with monthly payments until you die). But if you buy a life annuity, any money left over when you die won’t go to your estateEstate The total sum of money and property you leave behind when you die.+ read full definition. Learn more about annuities.

4. Investments outside a registered plan

A variety of investments can produce regular income, such as GICs and bonds that pay interest, and stocks that pay dividends. Learn more about investing for income. Any money you make from “unshelteredUnsheltered A regular investment or account that does not shelter your money from tax. In other words, you have to pay tax on your savings and the money you make investing them.+ read full definition” investments is taxable. Learn more about how investments are taxed.

TipTip The sharing of important information about a company not known to the public.+ read full definition: One way to help minimize risk is by diversifying — holding a mix of investments with prices that don’t always move in the same direction. If you diversify, you’re less likely to lose a large portion of the money you’ve invested just because one part of the market isn’t doing well. Learn more about diversificationDiversification A way of spreading investment risk by by choosing a mix of investments. The idea is that some investments will do well at times when others are not.+ read full definition.

Retirement income from government benefits

The federal government offers retirement benefits based on your income and/or the amount you contribute during your working years. In order to start receiving the benefits you will need to apply for them, even if you know you are eligible.

1. Canada PensionPension A steady income you get after you retire. Some pensions pay you a fixed amount for life. Others save up money for you while you are working. You use that money to create income after you retire.+ read full definition Plan/Quebec Pension Plan (CPP/QPP)

The Canada Pension Plan/Quebec Pension Plan (CPP/QPP) is a public pension plan that gives monthly payments starting as early as your 60th birthday. The amount you receive depends on what you paid into the plan while you were working. You must be 59 or older and apply nine months before you retire. You can start receiving CPP payments any time after age 60. But your monthly payment is smaller if you start receiving it before age 65.

2. Old Age SecurityOld age security Canada’s largest public pension program. You qualify if you are age 65 and you have lived in Canada for at least 10 years after age 18. You may pay tax on your OAS income.+ read full definition (OASOAS See Old age security.+ read full definition) benefitBenefit Money, goods, or services that you get from your workplace or from a government program such as the Canada Pension Plan.+ read full definition

The Old Age Security (OAS) benefit is a monthly amount paid to Canadians over the age of 65. In order to receive the benefit, you have to be a Canadian citizen and have lived in Canada for a certain number of years after age 18. How much you receive depends on your other income and how long you’ve lived in Canada.

You may be automatically enrolled for OAS — if so, you will be informed by Service Canada. Otherwise, you may have to apply for OAS directly.

3. Guaranteed Income Supplement (GIS)Guaranteed income supplement (GIS) Extra money from the government for people with low¬ incomes who get Old Age Security. What you get depends on your income or your joint income if you have a spouse or common-law partner. GIS is not taxable.+ read full definition

The Guaranteed Income Supplement (GIS) is a monthly amount paid to Canadians aged 65 or older living on lower incomes, in addition to the OAS. How much you receive depends on your income (and your spouse’s if you have one). Your annual income must be less than the maximum threshold in order to qualify.

When you retire, you’ll likely be entitled to at least some federal government retirement benefits. But you won’t get them if you don’t apply. Stay up to date on your tax filing and sign up for CRA MyAccount to stay on top of your benefits information.

Other considerations for managing your retirement income

1. Income splitting to reduce tax

Consider splitting your pension income with your spouse and help reduce the tax you pay. You might be able to shareShare A piece of ownership in a company. A share does not give you direct control over the company’s daily operations. But it does let you get a share of profits if the company pays dividends.+ read full definition up to half of your pension income with your spouse or common-law partner each tax year. Learn more about income splitting.

2. Funding your retirement using your home

A home is the most valuable assetAsset Something of value that a company or an individual owns or controls. Examples: buildings, equipment, property, a car, investments, or cash. Can also include patents, trademarks and other forms of intellectual property.+ read full definition many people own. You might be considering selling your home to add to your retirement income, or to your savings before you retire. It’s wise to consider this carefully before selling.

When estimating how much your home could be worth when you retire, it’s important to be conservative. A house or condo is an asset, and selling assets comes with risk. Just like the prices of stocks, bonds, ETFs and mutual funds, home prices will fluctuate depending on market conditions.

If you’re interested in downsizing, you’ll also need to consider where you’d like to move, and how much it would cost compared to what you’d gain from selling your home.

3. Borrowing against your home to free up equityEquity Two meanings: 1. The part of investment you have paid for in cash. Example: you may have equity in a home or a business. 2. Investments in the stock market. Example: equity mutual funds.+ read full definition

There are several optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition for borrowing against your home, including a reverse mortgage. In a reverse mortgageMortgage A loan that you get to pay for a home or other property. Often the loan is for 20 years or more. You make a set number of payments for a set amount each year.+ read full definition, you can in most cases borrow between 10% to 40% of your home’s value, depending on what your home is worth, your age and interest rates. Borrowing against your home lets you free up equity without having to move and may come with certain tax advantages. However, you will need to pay appraisalAppraisal An evaluation of what your home or other property is worth today. Most often done by someone who is an expert or is certified by an organization or the government. The Appraisal Institute of Canada is one organization that designates individuals.+ read full definition and other fees, and the amount borrowed will accumulate interest.


Just like other areas of your life, retirement should be planned out. Some considerations for you include:

  • Understanding the different income streams that will fund your retirement.
  • Applying for government benefits when you are eligible.
  • Potentially using the sale of your home to fund your retirement or borrowing against its value.
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