Let’s start with the number making headlines right now.
According to BMO’s 2025 Annual Retirement Survey, the average Canadian believes they need $1.7 million to retire comfortably. Ontarians set the bar even higher, with the average target sitting at $1.92 million.
Those numbers trigger one of two reactions: quiet panic, or dismissal. Both miss the point. Because the real question isn’t what the average Canadian thinks they need. It’s what you specifically need, based on your actual life in Ontario. That number, when calculated properly, is almost always more manageable than the headlines suggest.
Why the “70 to 80 percent rule” falls short
You’ve probably heard this rule: you need 70 to 80 percent of your pre-retirement income every year once you stop working. It’s repeated so often it feels like fact.
The problem is that it ignores how spending actually changes with age. Fred Vettese, one of Canada’s most respected retirement economists, argues in his 2024 book that the real income replacement rate for most retirees is closer to 40 to 50 percent of pre-retirement earnings. He points to research showing that Canadian seniors actually save a higher percentage of their income than younger Canadians, because spending drops naturally as people age into their 70s and 80s.
That matters because if you’re over-estimating what you’ll spend, you may be over-saving, working longer than you need to, or feeling less financially secure than your situation actually warrants.
What retirement actually costs in Ontario in 2026
According to Statistics Canada’s 2024 Canadian Income Survey, the average after-tax retirement income for senior couples was $74,200 per year, or $6,183 per month. But that reflects all of Canada, including lower-cost regions. Ontario, especially the GTA, runs higher. Here’s a realistic breakdown:
Lifestyle | Annual spending (after tax) | Monthly equivalent |
Modest (basics covered) | $48,000 to $58,000 | $4,000 to $4,800 |
Comfortable (travel, dining) | $65,000 to $85,000 | $5,400 to $7,100 |
Active/premium (frequent travel, gifting) | $90,000 to $130,000+ | $7,500 to $10,800+ |
These figures assume your mortgage is paid off. If you carry housing debt into retirement, a Royal LePage survey found 29 percent of Canadians planning to retire in 2025 or 2026 expect to carry a mortgage, so add those payments on top.
The nest egg calculation, and the number that changes everything
The 4 percent rule is the most widely used framework in retirement planning: withdraw 4 percent of your portfolio annually, and your money has a high probability of lasting 25 to 30 years.
Applied to Ontario:
Annual income needed from savings | Portfolio required |
$40,000 | $1,000,000 |
$55,000 | $1,375,000 |
$70,000 | $1,750,000 |
Those numbers look daunting. But here’s what most retirement articles fail to mention: you are not drawing all of that income from savings. The Canadian government provides two foundational income streams that most Ontarians significantly underestimate.
Canada Pension Plan (CPP): The maximum monthly CPP at age 65 in 2026 is $1,507.65, or roughly $18,092 annually. The average for new beneficiaries is approximately $808 per month. Timing matters enormously: delaying CPP to age 70 permanently increases your payment by 42 percent. For a professional near the maximum, that’s the difference between $1,507 and roughly $2,141 per month, guaranteed for life, fully indexed to inflation.
Old Age Security (OAS): In 2026, OAS pays up to $742.31 per month for those aged 65 to 74, rising to $816.54 for those 75 and older. One critical caveat for higher-income Ontarians: the OAS clawback begins at net income of $95,323 in 2026, recovering 15 cents per dollar above that threshold. Proactive tax planning before retirement can significantly reduce or eliminate this.
A real example: a Mississauga couple retiring at 65
Mark and Linda, both 65, are professionals in Mississauga. Their mortgage is paid off. They want $80,000 per year after tax, enough for travel, dining out, and helping their kids occasionally.
Income source | Annual amount |
Mark’s CPP (near maximum) | $16,200 |
Linda’s CPP (near average) | $9,696 |
Mark’s OAS | $8,908 |
Linda’s OAS | $8,908 |
Total government income | $43,712 |
Gap to fill from savings | $36,288 |
To generate $36,288 from savings using the 4 percent rule, they need a portfolio of approximately $907,000. Not $1.92 million. Under $1 million, when government income is properly optimized.
If they delay CPP to 70, their combined benefit rises by roughly 42 percent, cutting the portfolio requirement by another $200,000 to $275,000. The timing decision alone is worth hundreds of thousands of dollars.
The variable most people underestimate: longevity
For a 65-year-old couple, there is a 50 percent probability that at least one spouse will live to age 94, and a 25 percent chance one will reach 97. That’s not a 20-year retirement. That’s potentially 30 years or more. At 2.5 percent annual inflation, $80,000 today has the purchasing power of roughly $47,000 in 25 years.
Planning to age 85 is not a plan. It’s a gamble. Your strategy needs to work if you live to 95.
Four things that move your number the most
CPP timing. Taking CPP at 60 versus 70 can be worth $200,000 to $400,000 over a long retirement. Most people make this decision casually. It deserves serious analysis.
Tax structure. A couple drawing $80,000 gross from RRSPs will pay significantly more tax than one drawing the same amount through a combination of RRSP income, TFSA withdrawals, and CPP. Pension income splitting, TFSA sequencing, and spousal RRSP strategies can reduce your required portfolio by 15 to 25 percent.
Defined benefit pension. A DB pension paying $2,000 per month is the income equivalent of having roughly $600,000 invested. If you or your spouse has one, your savings target drops dramatically.
Healthcare costs. OHIP covers a broad range of services, but dental, vision, hearing, and prescription costs for those without group coverage can reach $3,000 to $8,000 per person annually. Budget for these as a real line item, not an afterthought.
The bottom line
Roughly 59 percent of Canadians cannot accurately estimate how much they would need to retire comfortably. That uncertainty, more than any actual savings gap, is what makes retirement feel overwhelming.
For most Ontario professionals and business owners who own their home, have been contributing to RRSPs and TFSAs, and take CPP strategically, the portfolio required is often $800,000 to $1.3 million, not $1.9 million. The difference is in the details: tax efficiency, benefit timing, and a realistic view of how spending changes across a 25 to 30 year retirement.
The number that matters most is yours. Not the national average. Not the Ontario benchmark. Yours.