Retirement Income Gap Calculator Canada

Will the income you expect cover the retirement you want? The calculator compares your desired retirement income with what you expect from the Canada Pension Plan, Old Age Security, any workplace pension and your savings, and shows the annual and monthly shortfall, or surplus.

What the income gap means

When desired income exceeds expected income, the difference is a gap to cover with more savings or changed plans. When expected income is higher, you have a surplus. Finding the figure early gives you time to act: a gap discovered at 55 is a manageable savings target, while the same gap at 65 is much harder to close.

Setting your desired income

Around 70% of pre-retirement income is a common starting point, since some work costs disappear and you are no longer saving for retirement. Your real target depends on your plans:

• Housing: a paid-off home lowers your needs; rent or a remaining mortgage raises them.
• Lifestyle: frequent travel or costly hobbies push the figure up.
• Health and care: later-life care can be expensive.

Adding up your expected income

• CPP: your estimated annual Canada Pension Plan pension, or QPP in Quebec.
• OAS: your estimated annual Old Age Security pension.
• Workplace pension: any defined-benefit or defined-contribution pension income.
• Savings income: what you plan to draw each year from RRSPs, TFSAs and other accounts.

The CPP and OAS calculators on this site can estimate those figures, and your personal estimates are available in My Service Canada Account. Your pension statement gives the pension figure.

A worked example

You want $60,000 a year and expect $12,000 from CPP, $8,500 from OAS, $20,000 from a workplace pension and $5,000 from savings. Expected income totals $45,500, leaving a gap of $14,500 a year, about $1,208 a month.

Work two more years so savings can support $10,000 a year instead of $5,000, and expected income rises to $50,500, cutting the gap to $9,500, about $792 a month. Delaying CPP for a larger payment would shrink it further.

With only CPP and OAS, the same $60,000 target leaves a $39,500 gap, about $3,292 a month, with government benefits covering about 34% of the goal.

Closing the gap

• Save more now; even modest extra contributions compound.
• Work a little longer, which adds income and shortens the years savings must cover.
• Delay CPP or OAS for larger monthly amounts.
• Lower your target; small spending changes can close a surprising share of the gap.
• Draw more from savings, if your nest egg can sustain it.

When you have a surplus

A surplus lets you retire earlier, spend more freely, help family or build a larger estate, and it gives a cushion against unexpected costs and market downturns.

Other benefits and provinces

CPP and OAS are federal and do not depend on your province, though Quebec residents receive QPP instead of CPP. The Guaranteed Income Supplement can add income for lower-income seniors, and several provinces run their own supplements. Fold any you expect into an income line. These benefits are income-tested, so heavy RRSP withdrawals can reduce them.

Common mistakes to avoid

• Mixing before-tax and after-tax figures; state desired and expected income the same way, before tax.
• Guessing CPP and OAS instead of checking your estimates, which can be off by thousands a year.
• Ignoring inflation over a long retirement.
• Forgetting that a paid-off mortgage or a smaller home changes your desired income.

Using your estimate

Revisit the calculation as your situation changes, and use it with the CPP, OAS, GIS and FIRE calculators on this site. Because it works in today’s dollars before tax, adjust for inflation and tax for a detailed plan, or consult a qualified adviser.

This article is general information only and not financial advice; confirm figures with official sources or a qualified professional.

About This Retirement Income Gap Calculator

Use this retirement income gap calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.