What's the average retirement age in Canada?

Imagine this. It’s your last day of work–but not for the week and not before vacation. No, it’s your last day of work forever. You’re retiring. You’re ready to enjoy your golden years. Maybe you want to go fishing everyday or get going on that book you’ve always wanted to write. No matter your plans, you’re excited and you’re ready. How old do you think you are?

Is there a difference between the age most people retire and the age the government expects you to become a pensioner? Moreover, what are some things you need to be thinking of now–while you’re still working and daydreaming about retiring–that can help you when you finally do head for the door on your last day? In this article, we’ll take a look at the average retirement age in Canada and look at what you need to be doing now. Then we’ll compare and contrast a bit with what retirement looks like in the United States as well.

Preparing for Retirement

Retiring with enough money to see you to the end of your days is everyone's goal. You certainly don’t want to outlive your nest egg, and, for some, it's far more preferable to have that money outlive you so that you can pass it on to future generations. Before we go too far, though, it’s important that we prime the engine with some important things you need to be doing before you even consider retirement.

What do you want to do?

If you’re younger and reading this article, this question could be a bit difficult to answer. It's hard to know what you want to do in retirement if you’re 20+ years away from it. But having an understanding, even if it's only a rough outline, can help you plan better. Are you hoping to travel around the world? You might need more cash than you’d think. Want to just stay at home with the grandchildren most of the time? That could end up being slightly cheaper. House paid off? Own two homes? Want to live in a van by the ocean in Mexico? All of these things affect the age at which you can retire and how much money you need to retire with.

Retirement accounts

There are a number of different retirement accounts that you should be very familiar with, especially if you are a younger person. Younger investors have the good fortune of being able to take advantage of time. The more money you can accumulate early on, the better you are because it has more time to grow.

Registered Retirement Savings Account (RRSP)

The Registered Retirement Savings Account (RRSP) is most often an employer-sponsored plan. The funds you contribute to it, via a payroll deduction, are tax free up to a certain limit each year. These aren’t just passive savings accounts either. When you sign up for and contribute to an RRSP, you'll be able to elect where your funds go and what you invest in. The mix you elect has quite a bit to do with how far along you are in your career. For example, if you’re a younger person, you might elect to have more stocks in your portfolio because you can take advantage of time to soak up some of the volatility that comes with stock investments. Conversely, if you’re approaching retirement age, you may want to shift into more conservative investments to hold onto value.

If you don’t know exactly what you should be doing, you can consult an investment advisor; your specific RRSP may offer advising services. Nevertheless, whether it does or not, you should prepare to pay a portion of your overall portfolio to the financial institution that holds it.

Registered Retirement Income Fund (RRIF)

An RRIF is another type of account that allows you to save for retirement. It’s important you realize that the amount you get each month in retirement is set at the outset of the account. This means that you won’t be able to take advantage of market gains like you would in an RRSP. Still, RRIFs can be another tool in your retirement toolbox.

Tax-Free Savings Account (TFSA)

The Canadian government wanted to spur people to save so they created a savings account just for that purpose. Deposits made to TFSAs are after taxes and not taxed when you withdraw them, making them a powerful saving tool although not quite as potent as RRSPs.

Ordinary Investing

Even though they’re subject to capital gains and other taxes, regular investment accounts are still a key way for Canadians to save for retirement. They can also double as an emergency fund or other investment.

Government Services

In addition to the accounts you can open and operate yourself, the Canadian government offers a number of different options for retirees.

Canada Pension Plan (CPP)

The Canada Pension Plan is a federal program that provides you with a monthly income once you are retired. You contribute throughout your entire working career and you can start taking your CPP benefits as early as 65 years old. If you wait until 70, you can increase the size of your payouts. As of July of 2021, recipients received an average of $619. As you can see, it's not necessarily enough to live on, making other accounts crucial.

Old Age Security Program (OAS)

Funded by the government (not taxpayers like the CPP), the OAS automatically provides an income each year beginning at age 65. Just like the CPP, you can defer the payments to a later point in life, thereby increasing the amount you receive. The maximum payment is around $600 per month. Again, just a part of the overall retirement puzzle.

Guaranteed Income Supplement (GIS)

The GIS specifically supports retired Canadians who may not have other investments. How much you receive depends on your income and if you’re married.

If you’ve got your ducks in a row and you understand what you want to do and have the accounts all set up to do it, you’re ready to retire! But when?

So what is the average retirement age?

Believe it or not, the Canadian government is pretty spot on here. From 2001 to 2021, the average age of retirement was 64.5 years old. Being off by just six months is pretty good! Remember, you can retire whenever you want as long as you have the money to support yourself. If you’re waiting until the retirement age, 65 is the minimum. If you wait longer–up to age 70–you can enjoy additional benefits from the CPP and OAS programs.

Defining Features Compared to the USA

The United States offers a similar retirement account structure as Canada, albeit with far less government support. Social security is available to Americans beginning at age 62. If they wait until age 65, they’ll get the full amount, and at age 70, one can expect even greater amounts. Still, like the CPP, social security is not enough to live on, so Americans invest in tax-deferred accounts known as 401(k)s, an account named for the part of the legal code containing it.

The big defining factor, however, is healthcare. America does not have universal healthcare. Not to mention, medicare, which is the healthcare plan for retired Americans, doesn’t kick in until age 65. When it does kick in, it has very specific things that it covers. Prescription drugs, for example, were just added into the coverage in the last decade.

Tips for Planning

When it comes to retirement, a little bit of planning can go a long way. Take time to consider your options for retirement, and the earlier the better.

Contribute Early

The earlier you contribute, the better off your financial situation will be when you retire. Money can grow with time, and, given enough time, can smooth out the ups and downs of the market. Make sure you have a frank conversation with your spouse or partner about what you want to do in retirement as well.

Calculate How Much

It's a hard question to answer but understanding how much you need to retire can be extremely helpful. There are no hard and fast rules, so the best advice is to start by thinking about the expenses you currently have, remove the ones that might go away with time, like school tuition and commuting costs. If you want to keep up your current lifestyle, you’ll need a similar amount.

Final thoughts on the average retirement age in Canada

The average age of retirement might be 64.5 in Canada, but that doesn’t mean Canadians will stop working completely. Many retirees are taking on other jobs, whether for a paycheque or as volunteer work, to stay active and meet unrealized life goals. Retirement can be a great time to explore, especially if you save properly.