Updated: April 2025  |  bremo.io financial guides

Early Retirement in Canada — What You Need to Know

Retiring before age 65 is a dream for many Canadians — and for an increasing number, it is achievable. But early retirement comes with unique challenges: no OAS until 65, reduced or no CPP, potentially decades of self-funded living, and healthcare costs. Here is what you need to plan carefully before leaving work early.

What Counts as Early Retirement in Canada?

In Canada, "early retirement" typically means retiring before age 65 — when OAS begins. Some define it as before 60 (when CPP can first be collected). For FIRE enthusiasts, early retirement might mean age 40 or 50. The earlier you retire, the longer your money needs to last and the more you need saved.

Government Benefits and Early Retirement

This is the biggest planning challenge. Before 65, you cannot access:

• Old Age Security (OAS)
• Guaranteed Income Supplement (GIS)
• Full CPP (though reduced CPP is available from age 60)

If you retire at 55, you may face a 10-year gap before any government income begins. You need savings to bridge that period entirely.

How Much Do You Need to Retire Early in Canada?

The widely used 4% rule suggests you need 25x your annual expenses in invested assets. If you spend $50,000/year, that is $1.25 million. But retiring early at 55 or 60 means a potentially 35-40 year retirement, which may require a lower withdrawal rate of 3-3.5% — implying 28-33x annual expenses.

Health Insurance Coverage Before 65

Provincial health plans cover medically necessary services, but do not cover prescription drugs, dental, vision, or paramedical services for most people under 65. When you leave work, your employer group benefits end. You will need to purchase private health insurance — which can cost $200-500/month for a couple — until provincial senior drug programs begin.

Withdrawing RRSP Before 71

If you retire early, withdrawing from your RRSP in the years before CPP and OAS begin can be highly tax-efficient. If your only income is RRSP withdrawals of $30,000-50,000/year, you may pay very little federal tax. This reduces the RRSP balance, which lowers future mandatory RRIF withdrawals — reducing clawback risk in your 70s.

CPP at 60 vs. Waiting

If you retire at 55 or 60, you might take reduced CPP at 60 to help fund living expenses. However, if you have enough savings to wait, delaying CPP to 65 or 70 produces a much higher lifetime income. The breakeven for 60 vs 65 is around age 74.

Workplace Pensions and Early Retirement

Some defined benefit pension plans allow early retirement at 55 with a reduced pension, or at age 60 with an unreduced pension. Some plans offer a "bridge benefit" that tops up income until age 65 when OAS begins. Check your specific plan rules carefully — early pension reductions can be significant.

TFSA in Early Retirement

TFSAs are ideal for early retirees. Withdrawals are tax-free and do not affect income-tested benefits. By building a large TFSA before retirement, you can fund early retirement years without increasing taxable income — which matters if you want to access any low-income benefits later.

Employment Insurance (EI) and Early Retirement

Voluntarily leaving your job to retire does not qualify you for EI benefits. EI is only for involuntary job loss. If you are laid off and are near retirement age, you may be able to claim EI as a bridge while deciding your next steps.

Key Steps to Plan Early Retirement in Canada

1. Calculate your required portfolio based on expected annual spending
2. Map out year-by-year income: savings withdrawals, CPP timing, OAS timeline
3. Plan health insurance coverage from retirement to age 65
4. Optimize RRSP drawdown before CPP and OAS begin
5. Build TFSA to maximize tax-free income
6. Consider partial retirement or phased retirement as a stepping stone