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Tax PlanningHow to Save for Retirement in Canada


This article was reviewed by Chris Singer, CFP®.

Relaxing on a boat, exploring Europe, playing with your grandchildren—there’s so much to look forward to in retirement. Most of us have dreams of what we’d like to do once we no longer need to work. Maybe you’re even counting down the days! However, planning ahead is essential to ensure the retirement of your dreams is possible. 

There’s no one-size-fits-all solution for retirement planning. How much you spend, your income sources, and taxes all factor into how much money you’ll have by the time you reach your golden years. The people who reach retirement with a solid nest egg are the people who were diligent about saving during their working years. The key is to become a saver, creating a good habit that will transform your retirement.

But how do you do that? Let’s dive in. 

When to Start Saving for Retirement 

When it comes to saving for retirement, there’s no question that starting as early as possible is the biggest impact you can make. Beyond just building the savings habit, saving early means your money will have more time to compound earnings, increasing in value as you get closer to retirement.

We often hear people say that they’re waiting for something—their next raise, to get more established in their career, after they have children, or something similar—before they start saving. But the reality is that if you wait, you’ll always keep waiting. Another excuse will come up, then another, and before you know it, you’ll be in your late 40s with no solid savings. 

By starting now, you can start to build a habit that will benefit you immensely in your golden years.

How Much You Should Save

As a general rule, aim to save 10% of your monthly paycheque. Set up an automatic deposit right after payday to set the money aside. By saving this money before you have a chance to spend it, you won’t be tempted to use it on a whim, and you’ll hardly notice the loss once you adjust to the difference. Saving will become an unconscious habit and your nest egg will steadily grow. 

If 10% made your heart stop, you’re not alone. If you can’t manage 10% yet, start with a smaller number and work to increase it each year. Even if you’re only putting away $50 dollars a month, that’s still a foundation that you can build on in the future. 

This is a good time to take a look at your budget to ensure you’re living within your means, and to create a budget if you don’t have one already. 

Use Windfalls Wisely

You may find yourself with unexpected money, such as a bonus or inheritance. Rather than spending it immediately by treating yourself, put a significant portion of it into savings. You can still have some fun—enjoy a treat and spoil yourself a little—but by saving the majority of the money, you’ll be that much further ahead on your saving goals. The best way to manage windfalls is to dedicate certain percentages to fun and to savings. For example, put away 85%, and treat yourself with 15%. 

Similarly, if you get a raise at work, increase the amount of money that you save each month instead of spending it. You’re already used to living on a smaller amount of money, so invest most of the addition to pad your retirement fund. You won’t miss the “new” money as much as you might think. 

How to Save Efficiently 

Once you’re in the habit of saving, look for the best vehicle for your money. 

Registered Retirement Savings Plans (RRSP) and Tax-Free Savings Accounts (TFSA) are two good places to invest your money. However, the best option depends heavily on your personal financial situation. 

As an example, if you’re still young and earning a smaller income but expect to increase your salary in the future, focus on your TFSA and don’t fill up your RRSP yet. This is because your RRSP will help save you more taxes in the future when you have a higher paying job, and you don’t want to waste that RRSP space yet. 

Looking for free money? If your work offers a group RRSP or pension plan, make sure to sign up for it, even if you’re still in a low tax bracket. These group matching plans will give you free money to match your contributions, and the longer you’re signed up, the more you will benefit from the company matching.  You’d be surprised how many people don’t take advantage of these types of plans—don’t be one of them. 


Once you know the method you’d like to use, look at how you can begin to grow your savings through investments. 

If you had $20,000 saved in investments, and then left it alone for 50 years with an 8% investment plan, you’d have $938,000 by the time you retire. This is compounding investment growth, and it’s an example of why you want to start preparing for retirement as early as possible. Even if you can’t save a large amount of money initially, time will be on your side to help it grow through investments. 

How you invest will depend on you and your choices—you can invest directly through your bank, or through a financial institution. Do your research and make the choice that best works for you and your money. If you’re unsure, we’re always happy to schedule a call and go through your options. 

Preparing for Inflation

Inflation is another area where many people forget to plan ahead for retirement. You should assume that inflation will continue at an average of 3% a year, which means that your money won’t have the same purchasing power in 25 years as it does today. 

To keep your money’s value, invest it rather than storing it under your mattress. When it’s not working for you, money will decrease in value as inflation creeps up. 

All of our plans at Cedar Rock take inflation into account when we create retirement plans, so if you’re worried about inflation as you retire, book a call and we can chat about how it will impact you. 

A Fulfilling Retirement

Some of our wealthiest clients are not the ones making the most money—they’re the ones who had a plan for saving and followed through. They aren’t buying a brand-new Porsche or going on lavish vacations every year. They’ll buy a used Porsche and find vacation deals, so they still live a full life but are better established when they retire and live a more comfortable retirement that is in line with their established lifestyle.

We want you to have a life like them. We’re available to schedule a meeting and look forward to working with you on your financial goals. In the meantime, go through our retirement guide to learn the steps to having a stress-free retirement!