Updated: April 2025  |  bremo.io financial guides

Building a Retirement Budget in Canada

A retirement budget is the foundation of financial security in your later years. Unlike a working-years budget, a retirement budget must account for new income sources, changing expenses, healthcare costs, and the reality that it needs to sustain you for potentially 25-35 years. Here is how to build one that actually works.

How Much Do Canadian Retirees Spend?

According to Statistics Canada, the average Canadian household headed by someone 65+ spends approximately $55,000-$65,000 per year before taxes. Couples tend to spend more; single seniors spend less. Spending often follows a "smile" pattern — higher in early retirement (active travel and lifestyle), lower in mid-retirement, and rising again in late retirement due to healthcare costs.

Step 1: Identify Your Essential Expenses

Start with non-negotiable monthly costs:

• Housing: mortgage or rent, property taxes, condo fees, home insurance, maintenance
• Food: groceries, dining out
• Utilities: electricity, gas, internet, phone
• Transportation: car payments, insurance, gas, transit
• Healthcare: premiums, prescriptions, dental, vision
• Insurance: life, supplemental health, home and auto

Step 2: Estimate Discretionary Spending

These are important for quality of life but can be adjusted if needed:

• Travel and vacations
• Hobbies and recreation
• Entertainment, subscriptions
• Gifts and charitable donations
• Clothing and personal care

Step 3: Plan for Healthcare Costs

Healthcare is a significant and often underestimated expense in retirement. While provincial health plans cover most medical care, you will need to budget for:

• Prescription drugs (until provincial senior drug plans kick in at 65)
• Dental care (not covered by most provincial plans)
• Vision care
• Hearing aids
• Private home care assistance in later years
• Potential long-term care costs

Budget at least $5,000-$8,000/year per person for healthcare not covered by provincial plans.

Step 4: Build an Emergency Fund

Even in retirement, keep 3-6 months of expenses in an accessible savings account. Unexpected home repairs, medical expenses, or family emergencies happen. Avoid having to sell investments at a bad time to cover short-term needs.

Step 5: Map Your Income Sources

List all expected income sources and when they begin:

• CPP: amount and start date
• OAS: start date (65 or deferred)
• Workplace pension: monthly amount
• RRIF minimum withdrawals (starting at 71 or earlier if elected)
• TFSA withdrawals (flexible, tax-free)
• Investment income from non-registered accounts
• Part-time work income
• Rental income (if applicable)

The 70-80% Rule

A common guideline is that retirees need 70-80% of their pre-retirement income. This works because retirement eliminates some expenses (commuting costs, work clothing, retirement savings contributions, CPP premiums). However, it ignores the possibility of increased healthcare spending or lifestyle spending in early retirement. Build your actual budget from scratch rather than relying solely on the percentage rule.

Inflation Planning

A 3% annual inflation rate doubles prices roughly every 24 years. Your $60,000 retirement budget at 65 becomes a $120,000 requirement by age 89 at the same purchasing power. CPP and OAS are indexed to inflation, but RRIF withdrawals and fixed annuity payments are not. Plan for inflation exposure in your investment and withdrawal strategy.