Canadian retirement glossary

A

Adjusted cost base (ACB)

The total cost of an investment for tax purposes, including purchase costs. When a non-registered investment is sold, the capital gain or loss is the sale proceeds minus the ACB. Learn more

Age amount

A federal non-refundable tax credit available from age 65 that is reduced as net income rises. Provinces offer similar credits; the site's tax estimates leave these credits out. Learn more

Allowance

An income-tested federal benefit for people aged 60 to 64 whose spouse or common-law partner receives the GIS. It stops at 65, when the person can apply for OAS and GIS in their own right. Learn more

Allowance for the Survivor

An income-tested federal benefit for widowed people aged 60 to 64 with low income. Like the Allowance, it ends at 65. Learn more

Annuity

A contract, usually bought from an insurance company with a lump sum, that pays a set income for life or for a fixed period. Registered savings such as RRSP or RRIF money can be used to buy one. Learn more

Asset allocation

How a portfolio is divided among types of investments, such as stocks, bonds and cash. It largely determines how much a portfolio's value can rise and fall.

Attribution rules

Tax rules that can treat income from money given or lent to a spouse or family member as the giver's income. Spousal RRSP withdrawals soon after a contribution are one common case; confirm the rules with the CRA. Learn more

Average tax rate

Total income tax divided by total income. It is always lower than or equal to the marginal rate on the last dollar earned. Learn more

B

Basic personal amount

The amount of income on which no tax is payable, delivered as a non-refundable credit. For 2026 the federal amount is $16,452, reduced to $14,829 for incomes between $181,440 and $258,482; each province sets its own. Learn more

Break-even age

The age at which the total payments from starting a pension later catch up with the total from starting earlier. It is a common way to compare CPP or OAS start ages, though it ignores other factors such as health and investment returns. Learn more

C

Canada Pension Plan (CPP)

The contributory public pension for people who work in Canada outside Quebec, funded by employee, employer and self-employed contributions. The retirement pension can start from 60 to 70; the maximum at 65 for a pension starting in January 2026 is $1,507.65 a month. Learn more

Capital gain

The profit when an investment held outside a registered account is sold for more than its adjusted cost base. Only part of a capital gain is included in taxable income; confirm the current inclusion rules with the CRA. Learn more

Common-law partner

For federal tax and benefit purposes, generally a person you have lived with in a conjugal relationship for at least a year, or with whom you share a child. Many spousal rules, such as pension income splitting, apply equally to common-law partners; confirm definitions with the CRA. Learn more

Commuted value

The lump-sum value today of a defined benefit pension's future payments. Some plan members leaving before retirement can choose to take it instead of the monthly pension, usually into a locked-in account. Learn more

CPP death benefit

A one-time CPP payment to the estate or eligible person after a contributor dies. The maximum is $2,500. Learn more

CPP enhancement

The gradual increase in CPP contributions and future benefits. It added a first additional contribution on earnings up to the YMPE and a second additional contribution (CPP2) on earnings between the YMPE and the YAMPE. Learn more

CPP pension sharing

An arrangement, applied for through Service Canada, in which spouses or common-law partners who both receive CPP share the pension earned during their time together. It is separate from pension income splitting on the tax return. Learn more

CPP survivor's pension

A monthly CPP payment to the surviving spouse or common-law partner of a contributor. For 2026 the maximum is $803.54 a month under 65 and $904.59 at 65 or older. Learn more

CPP2 (second additional CPP contribution)

A contribution on earnings between the YMPE and the YAMPE. In 2026 the employee rate is 4% on earnings between $74,600 and $85,000, to a maximum of $416.00. Learn more

D

Decumulation

The stage of financial life when savings are drawn down to provide income, rather than built up. Decisions about withdrawal order, RRIF minimums and annuities belong to this stage. Learn more

Deferred profit sharing plan (DPSP)

An employer-sponsored plan in which the employer shares profits with employees through tax-deferred contributions. Contributions create a pension adjustment that reduces RRSP room. Learn more

Defined benefit (DB) pension plan

A workplace pension that promises a set retirement income, usually based on years of service and earnings. The employer bears the investment risk of funding the promise. Learn more

Defined benefit bridge benefit

A temporary extra payment some defined benefit plans provide from early retirement until public pensions such as CPP and OAS typically begin. Whether it is offered and how it is calculated depends on the plan. Learn more

Defined contribution (DC) pension plan

A workplace pension in which contributions go into an individual account and the retirement income depends on how much was contributed and how the investments performed. The member bears the investment risk. Learn more

Dividend tax credit

A federal and provincial credit that reduces tax on eligible dividends from Canadian corporations held outside registered accounts. Dividends are grossed up in income first, which can raise net income for OAS and other income tests. Learn more

Drawdown

A fall in a portfolio's value from a previous high. In retirement, it can also mean the gradual withdrawal of savings for income. Learn more

E

Earned income (for RRSP purposes)

The types of income, such as employment and self-employment earnings and net rental income, that create new RRSP room. New room each year is 18% of the previous year's earned income, up to the annual dollar limit. Learn more

Estate

Everything a person owns at death, less debts, which is distributed under a will or provincial law. Registered accounts with named beneficiaries may pass outside the estate. Learn more

F

First Home Savings Account (FHSA)

A registered account for saving toward a first home, combining a tax deduction for contributions with tax-free qualifying withdrawals. Its rules are separate from RRSPs and TFSAs; confirm limits and transfer options with the CRA. Learn more

G

Guaranteed Income Supplement (GIS)

A monthly, non-taxable, income-tested benefit for OAS recipients with low income. For October to December 2026, the maximum for a single person is $1,138.90 a month with income under $23,112. Learn more

I

Indexation

Regular adjustment of an amount for inflation. OAS is adjusted quarterly, CPP annually, and tax brackets and many credits each year. Learn more

Inflation

The general rise in prices over time, which reduces what a dollar buys. The Bank of Canada targets 2% inflation, the midpoint of a 1% to 3% range. Learn more

Instalments

Quarterly tax payments the CRA may ask for when not enough tax is withheld at source, for example when income comes from several sources that each withhold too little. The CRA sends reminders showing suggested amounts. Learn more

L

Life Income Fund (LIF)

A registered account that pays out locked-in pension money, usually transferred from a LIRA. Like a RRIF it has an annual minimum, and it also has a maximum set by the governing pension legislation. Learn more

Locked-in Retirement Account (LIRA)

A registered account that holds pension money transferred out of a workplace plan, such as a commuted value. The money is locked in, meaning it generally cannot be withdrawn as cash and must eventually provide retirement income. Learn more

Longevity risk

The risk of living longer than your savings last. Plans often test to age 90 or 95 to account for it. Learn more

M

Marginal tax rate

The combined federal and provincial tax on your next dollar of income. It is the rate that matters when deciding whether to take an extra RRIF withdrawal or defer income. Learn more

Monte Carlo simulation

A method that runs a retirement plan many times with randomly varied investment returns to show a range of outcomes. Results are often summarized as the share of trials in which savings last to a chosen age. Learn more

My Service Canada Account

The Government of Canada's secure online account for CPP and OAS. It shows your CPP contribution record and estimated pension, and lets you apply for benefits. Learn more

N

Net income

Total income minus certain deductions, reported on line 23600 of the tax return. It is the figure used for the OAS recovery tax and many income-tested benefits. Learn more

Nominal return

An investment return before adjusting for inflation. Subtracting inflation gives the approximate real return. Learn more

Non-registered account

An ordinary investment account with no special tax status. Interest, dividends and realized capital gains are taxed each year. Learn more

Notice of Assessment

The statement the CRA sends after processing a tax return. It shows tax owing or refunded, RRSP deduction limit and other carry-forward amounts. Learn more

O

OAS deferral

Choosing to start OAS after 65, for up to 60 months. The pension rises 0.6% for each month deferred, or 36% at 70. Learn more

OAS recovery tax (clawback)

A repayment of OAS equal to 15% of net world income above a threshold, which is $95,323 for 2026. OAS is fully recovered at about $155,320 (65 to 74) or $161,320 (75 or older) of net income in 2026, based on estimates. Learn more

Old Age Security (OAS)

A monthly federal pension paid from 65 based on years of residence in Canada, not work history. For October to December 2026, the maximum is $762.50 a month at 65 to 74 and $838.75 at 75 or older. Learn more

P

Partial OAS pension

An OAS pension for people with fewer than 40 years of residence in Canada after 18, calculated as years of residence divided by 40. At least 10 years are needed while living in Canada. Learn more

Pension adjustment (PA)

A figure on your T4 that reflects the value of benefits earned in a registered pension plan or DPSP during the year. It reduces the RRSP room you gain the following year. Learn more

Pension income amount

A federal non-refundable tax credit on eligible pension income, with provincial equivalents. The site's tax estimates leave it out, so actual tax is often somewhat lower. Learn more

Pension income splitting

A tax-return election that lets spouses or common-law partners allocate up to 50% of eligible pension income to each other. RRIF and annuity income qualifies from 65, registered pension plan life annuity income at any age, and OAS cannot be split. Learn more

Post-retirement benefit (PRB)

An addition to CPP earned by people under 70 who work and contribute while already receiving CPP. The 2026 maximum is $54.69 a month. Learn more

Q

Québec Pension Plan (QPP)

The public pension plan for people who work in Quebec, administered by Retraite Québec, which replaces CPP there. Its amounts are similar to CPP's but not identical. Learn more

R

Real return

An investment return after subtracting inflation, showing growth in purchasing power. The planner converts returns to real returns so results appear in today's dollars. Learn more

Registered Pension Plan (RPP)

A workplace pension plan registered with the CRA, either defined benefit or defined contribution. Life annuity payments from an RPP qualify for pension income splitting at any age. Learn more

Registered Retirement Income Fund (RRIF)

A registered account that pays out retirement savings, usually transferred from an RRSP. A minimum amount based on age must be withdrawn each year after the year it is opened, and all withdrawals are taxable. Learn more

Registered Retirement Savings Plan (RRSP)

A registered account in which contributions are tax-deductible and growth is tax-deferred until withdrawal. Room is 18% of prior-year earned income up to the dollar limit ($33,810 for 2026), less any pension adjustment, and the plan must be converted by December 31 of the year you turn 71. Learn more

Required minimum (RRIF minimum)

The amount that must be withdrawn from a RRIF each year, equal to the January 1 balance times a prescribed factor. The factor is 1 ÷ (90 − age) at 70 and under, then follows a CRA table, for example 5.28% at 71 and 20.00% at 95 or older. Learn more

Retirement income sources

The mix of payments that fund retirement, typically public pensions, workplace pensions, registered and non-registered savings, and sometimes work or home equity. Learn more

Retraite Québec

The Quebec government body that administers the Québec Pension Plan and provides QPP statements and estimates. Learn more

Rollover

A tax-deferred transfer of registered savings, for example from an RRSP to a RRIF, or to a surviving spouse's plan at death. Rollover rules are specific, so confirm them with the CRA. Learn more

RRSP meltdown

A strategy of withdrawing RRSP or RRIF savings faster in lower-income years to reduce larger taxable withdrawals later. Whether it helps depends on tax rates and benefits such as OAS and GIS. Learn more

S

Safe withdrawal rate

An estimate of how much can be withdrawn from savings each year without running out over a set period, such as the 4% rule of thumb. No rate is certain, because it depends on future returns, inflation and lifespan. Learn more

Sequence of returns risk

The risk that poor returns early in retirement, while withdrawals are being made, permanently reduce how long savings last. Two people with the same average return can see very different results. Learn more

Spousal RRSP

An RRSP owned by your spouse or common-law partner that you contribute to and deduct. It can help balance retirement income between partners, subject to attribution rules on early withdrawals. Learn more

Successor holder

A surviving spouse or common-law partner named to take over a TFSA, or in some cases a RRIF, as the new owner when the original holder dies. It differs from naming a beneficiary. Learn more

Survivor benefits

Payments to a surviving spouse, partner or children after a death, such as the CPP survivor's pension, a pension plan's joint-and-survivor option, or the Allowance for the Survivor. Learn more

Sustainable spending

The highest steady level of after-tax spending a plan can support to a chosen age under its assumptions. It changes as assumptions about returns, inflation and lifespan change. Learn more

T

Tax-Free Savings Account (TFSA)

A registered account in which contributions are not deductible but growth and withdrawals are tax-free. The annual limit is $7,000 for 2026, withdrawals are added back to room the next calendar year, and they do not affect OAS or GIS. Learn more

Taxable income

Net income minus further deductions, the amount to which tax brackets are applied. Credits such as the basic personal amount then reduce the tax calculated. Learn more

Today's dollars

Amounts adjusted for inflation so they can be compared with prices now. The planner shows projections this way to keep long timelines easy to read. Learn more

W

Withdrawal order

The sequence in which savings accounts are drawn on in retirement, such as non-registered first, RRIF first, or a blend. The order can change lifetime tax, OAS recovery tax and estate value. Learn more

Withholding tax

Tax deducted at source by a payer, such as a pension plan or financial institution, before income reaches you. It is a prepayment; the final amount owed is settled on the tax return. Learn more

Y

Year's Additional Maximum Pensionable Earnings (YAMPE)

The upper earnings limit for the second additional CPP contribution (CPP2). It is $85,000 for 2026. Learn more

Year's Basic Exemption (YBE)

The first portion of annual earnings on which no CPP contributions are paid. It is $3,500. Learn more

Year's Maximum Pensionable Earnings (YMPE)

The annual earnings ceiling for base and first additional CPP contributions and for CPP benefit calculations. It is $74,600 for 2026. Learn more

Definitions are general summaries for education. For legal definitions, see the CRA and Service Canada.