Retirement income in Canada: the layers that pay the bills

The three layers, in plain terms

Think of retirement income as three layers. The first is public pensions: the Canada Pension Plan (or the Québec Pension Plan for Quebec workers), Old Age Security and, for lower-income seniors, the GIS top-up. The second is workplace pensions from an employer or union plan. The third is your own savings in RRSPs, RRIFs, TFSAs and non-registered accounts.

The layers differ in what they depend on. CPP depends on your work and contribution history, OAS mainly on how long you've lived in Canada, workplace pensions on your plan's rules, and personal savings on what you've put aside and how it's invested.

They also differ in flexibility. Public pensions arrive as fixed monthly payments once they start; personal savings can be drawn down faster or slower as needs change. Much of retirement planning is about deciding how the flexible layers fill in around the fixed ones.

CPP or QPP: the earnings-based pension

CPP is paid for life and is based on your contributions from employment or self-employment. For 2026, the maximum monthly retirement pension starting at 65 is $1,507.65, and the average for new beneficiaries was $858.34 in July 2026. Your own estimate is in your My Service Canada Account.

You can start CPP anywhere from 60 to 70. Starting before 65 reduces the pension by 0.6% for each month (36% less at 60); starting after 65 increases it by 0.7% for each month (42% more at 70). There's no increase for waiting past 70, and the pension doesn't start automatically: you have to apply.

Quebec workers contribute to the QPP, administered by Retraite Québec. Its amounts are similar to CPP but not identical. The CPP guide covers start dates, sharing and survivor benefits in more depth.

OAS and GIS: the residence-based layer

OAS doesn't depend on work history. For the October to December 2026 quarter, the maximum is $762.50 a month for ages 65 to 74 and $838.75 a month from 75, and it's adjusted quarterly for inflation. A full pension requires 40 years in Canada after age 18; with at least 10 years, a partial pension of years divided by 40 may apply.

OAS can start at 65 or be deferred up to 60 months, adding 0.6% for each month of delay (36% more at 70). Higher-income seniors repay part of it through the recovery tax: 15% of net world income above $95,323 for 2026.

GIS is an income-tested top-up for OAS recipients with low incomes. For the October to December 2026 quarter, a single person can receive up to $1,138.90 a month when income is under $23,112. The OAS guide explains how these programs interact.

Workplace pensions and personal savings

A defined benefit pension pays a set amount, usually for life, based on a formula. A defined contribution plan builds an account balance instead, which you later draw on much like an RRSP. Some defined benefit pensions are fully indexed to inflation, some partly and some not at all; the plan booklet will say which. The pension comparison guide covers the differences.

RRSPs must be converted to a RRIF, used to buy an annuity or withdrawn by December 31 of the year you turn 71. A RRIF then requires a minimum withdrawal each year, starting at 5.28% of the January 1 balance at 71 and rising with age; at 65 the factor is 4.00%.

TFSA withdrawals aren't taxable and don't count as income, so they don't affect OAS or GIS. Non-registered accounts are taxed along the way on interest, dividends and capital gains. The order you draw these accounts down is a planning question in its own right.

Putting the layers together: Gord's example

Suppose Gord, 63, lives in Manitoba and is retiring this year. He has a workplace pension of $22,000 a year that isn't indexed, $320,000 in his RRSP, $75,000 in his TFSA and $40,000 in a non-registered account. His CPP estimate is $1,150 a month at 65, and he plans to start CPP and OAS at 65. He wants $50,000 a year to spend after tax.

The calculator uses an illustrative 5% return and 2% inflation, and reports everything in today's dollars. In his first year, the pension and about $29,448 from his non-registered account cover his spending, with about $1,448 of tax. At 64, the rest of the non-registered money and about $25,251 from his RRSP fill the gap.

From 65, CPP adds $13,800 a year and OAS $9,150, so he needs only about $17,719 from his RRSP. His tax bill rises to about $11,814 because more of his income is now taxable. At 75, OAS rises to $10,065 a year with the 10% increase for those 75 and older.

What the example reveals

Because Gord's pension isn't indexed, its value in today's dollars slides from $22,000 to about $15,712 at 80 and about $12,889 at 90. CPP and OAS hold their value in the calculator, so the gap his savings must fill keeps widening.

His RRSP is used up at 84; by 85, his TFSA supplies about $17,345 a year and his tax falls to about $5,440. Under these assumptions the TFSA runs out at 93, and his spending drops to what CPP, OAS and the pension provide, about $41,377 that year and about $30,908 at 94.

That isn't a prediction for anyone. It shows how the layers hand off to each other, and how a non-indexed pension, the order of withdrawals and the planning horizon all shape the final years. The withdrawal order tool compares different sequences for the same savings.

Questions to ask about your own mix

Laying out your own layers side by side often raises the questions that matter most. A few to work through:

• Which income sources are indexed to inflation, and which are fixed in dollar terms?
• If you retire before 65, which accounts bridge the years before CPP and OAS begin?
• Will RRIF minimums or a large pension push your income near the 2026 OAS recovery threshold of $95,323?
• Could a spouse or common-law partner share pension income on the tax return? See pension income splitting.
• Which account would you draw from last, and what would be left for an estate?