Insights & Resources

Many retirement conversations start with a lump-sum target. You may hear that if you want $10,000 a month after tax in retirement, you need $2 million saved. It sounds tidy, but it leaves out the part that matters most: retirement income does not come from one source, and it does not behave the same way across every household.

For Canadian retirees, a monthly retirement paycheque is usually built from several moving parts. CPP and OAS may begin at different times. Pension income may or may not be indexed. RRSP and RRIF withdrawals are taxable, while TFSA withdrawals are not. Home equity may be ignored, kept as a backup, or used intentionally later in life.

That is why the better question is not, “How much do I need saved?” It is “What income will fund the lifestyle I want, and where will that income come from over time?”

If your goal is $10,000 a month after tax, the planning process becomes much clearer when you break it into four steps: define the after-tax lifestyle target, estimate the before-tax income required, identify your guaranteed income floor, and then measure the gap your portfolio needs to fill.

Start with the paycheque

When someone says they want $10,000 a month after tax in retirement, they are usually not talking about a spreadsheet goal. They are talking about a lifestyle. They want their regular spending covered. They want flexibility for travel, family support, and home costs. Most of all, they want retirement to feel financially stable.

The mistake is jumping straight from that lifestyle goal to a portfolio number. Retirement income is not one faucet. It is a system made up of different income sources, each with its own tax treatment, timing, and inflation behaviour.

A useful way to think about it is through four income buckets:

• Government benefits such as CPP and OAS
• Workplace pensions, whether defined benefit or defined contribution
• Personal and corporate investments, including RRSPs, TFSAs, non-registered accounts, and corporate assets where relevant
• Home equity, whether as a backup or as part of a planned downsize later

Two couples may both want $10,000 a month after tax and still need very different plans. One may have no pension and depend heavily on taxable withdrawals from registered accounts. Another may have a strong indexed pension that already covers much of the monthly need. The lifestyle goal may be the same, but the portfolio job is not.

Convert net income into a planning target

The phrase “after tax” does a lot of work in retirement planning. If you want $10,000 a month landing in your chequing account, you will usually need more than $10,000 of gross income to produce it.

For many retired couples in Ontario at this spending level, a rough starting point is an effective tax rate somewhere in the mid-twenties. That is not a rule. It can be lower or higher depending on the mix of income, the size of RRSP or RRIF withdrawals, and whether there are unusually large income years.

It also helps to separate marginal tax rate from effective tax rate. Your marginal rate applies to the next dollar of income. Your effective rate is the average rate paid across total income. When estimating a retirement paycheque, the effective rate is usually the more useful starting point.

On that basis, $10,000 a month after tax may translate into something closer to $13,000 to $14,000 a month before tax. That range is not meant to be exact. It is meant to stop you from understating the income your plan needs to generate.

The source of the withdrawal also matters. If you withdraw $10,000 from a TFSA, that is generally $10,000 available to spend. If you withdraw $10,000 from an RRSP or RRIF, part of that withdrawal will eventually go to tax. Same spending goal. Different gross income required.

This is one reason some retirees feel wealthier on paper than they do in practice. The issue is not always that they failed to save enough. Sometimes the issue is that too much of the spending plan depends on taxable withdrawals at the wrong time.

Build your income floor

Once the gross target is roughly defined, the next step is to identify the income that will continue to arrive even if markets are difficult. This is your retirement income floor.

For most Canadians, that floor comes from CPP, OAS, and any pension income.

For 2026, the maximum CPP retirement pension at age 65 is $1,507.65 per month. But the average new CPP retirement pension at age 65, based on October 2025 data, is $803.76 per month. That gap matters. Many people assume they will receive something close to the maximum when their actual entitlement is much lower.

Your own estimate from My Service Canada Account is far more useful than a generic maximum. It reflects your actual contribution history and gives you a much better planning input.

For OAS, the maximum monthly amount for January to March 2026 is $742 for ages 65 to 74, and $816 for those age 75 and older.

If you also have a workplace pension, one question matters more than many people realize: is it indexed?

Indexed pension income tends to rise over time, which helps preserve purchasing power. Non-indexed pension income stays flat while living costs continue to rise. A pension of $5,000 a month may feel strong at age 66, but if it never increases, it can fund much less of the same lifestyle by age 80.

That does not make a non-indexed pension bad. It just means the portfolio may need to do more of the inflation-adjustment work later on. In other words, your investments are not only funding discretionary spending. They may also be replacing lost purchasing power from income that looks stable but is gradually worth less in real terms.

At this stage, the key question is straightforward: what income will show up each month with reasonable reliability, and will it rise over time or stay flat?

Measure the gap, not just the assets

Once you know your floor, the planning problem changes. You are no longer asking how large your portfolio should be in the abstract. You are asking how much income is missing and for how long.

This is where retirement planning often becomes more realistic. Many projections assume spending stays level forever, but real retirement rarely works that way.

A practical framework is to think in three phases:

• Active years: often from the mid-60s into the mid-70s, when travel, hobbies, family support, and larger discretionary spending are more common
• Settled years: often from the mid-70s into the mid-80s, when spending may stabilize or step down
• Care years: later years, when lifestyle spending may decline but support and care costs may rise

This matters because planning for the active-years budget to continue unchanged for the rest of life can overstate the required portfolio or create unnecessary anxiety. A better approach is to estimate spending in today’s dollars for the active years first, compare that to the income floor, and then identify the gap.

That gap can vary materially depending on several factors:

Whether pension income is indexed

Whether withdrawals come mainly from RRSPs and RRIFs or from more tax-flexible accounts such as TFSAs and non-registered assets

Whether spending is expected to step down later

Whether CPP or OAS is delayed to strengthen guaranteed income later in retirement

The result is that two households with the same lifestyle goal may need very different asset levels, withdrawal strategies, and timing decisions. The right answer is usually a range, not one magic number.

Three ways a $10,000 plan can work

It helps to see how different income mixes can support the same retirement lifestyle.

Portfolio-heavy household

Consider a couple, both age 65, with about $1.4 million invested and a paid-off home worth about $1 million. They have no workplace pensions and plan to keep the home for now.

Assume each spouse receives about 75% of the maximum CPP at age 65, or roughly $1,130 per month, plus full OAS of about $742 per month each. Their combined floor is roughly around $4,000 per month before tax.

If their active-years target is $10,000 a month after tax, and the rough gross target is $13,000 to $14,000 per month, their portfolio has to generate most of the difference. If much of that portfolio sits in RRSPs, the withdrawals are taxable, which means the gross withdrawals need to be larger than the spending goal suggests.

For households like this, withdrawal sequencing and early retirement market risk matter a great deal. The issue is not whether $1.4 million is “enough” in the abstract. The issue is whether that capital is being used in a disciplined way that manages taxes, spending spikes, and poor market timing.

Pension-heavy household

Now consider a couple with two defined benefit pensions totalling about $7,000 per month before tax, and importantly, those pensions are indexed.

Once CPP and OAS are added over time, they may come surprisingly close to the same lifestyle target without needing a very large investment portfolio. Their investments still matter, but more as a flexible layer for travel, renovations, family support, and unexpected costs.

That does not mean the plan is risk-free. Survivor income needs to be reviewed carefully. One spouse’s death can reduce pension income, and later RRIF withdrawals may stack on top of pension income in a way that increases taxes. In these cases, the risk is often not undersaving. It is assuming the pension solved every part of the plan.

Blended plan with home equity

A third example is a couple retiring at 66 with about $900,000 invested, one mid-sized pension, and a home worth roughly $1.1 million. CPP and OAS provide a decent base, the pension adds stability, and the investment portfolio fills the remaining gap.

They expect to use the portfolio more heavily in the active years and then downsize around age 75. If that move frees up roughly $300,000 after costs, those funds can serve as a reserve for future care costs or longevity risk.

In this kind of plan, the home is not a vague backup. It is a deliberate future funding source. That can reduce pressure on the portfolio earlier without forcing a sale at retirement.

Timing decisions can change the outcome

One of the most important parts of retirement planning is that the same savings can produce very different results depending on when income starts and which accounts are used first.

For CPP, starting after age 65 increases the benefit by 0.7% per month, up to 42% at age 70. Starting before age 65 reduces it by 0.6% per month, up to 36% at age 60. For OAS, delaying after age 65 increases the benefit by 0.6% per month, up to 36% at age 70.

That means delaying benefits can strengthen guaranteed income later in retirement. For people with long life expectancy and a relatively light income floor, that can make the later years feel more secure. The trade-off is that more of the spending in the 60s needs to come from investments or other sources.

For households with strong pensions or a clear need for earlier cash flow, starting CPP or OAS closer to 65 may be entirely reasonable. The point is not that delaying is always better. The point is that timing should fit the structure of the plan.

Withdrawal sequencing matters just as much. RRSP and RRIF withdrawals are taxable. TFSA withdrawals are not. In many plans, the years before large RRIF minimums begin offer a window to manage taxable income more intentionally.

Sometimes it makes sense to draw more taxable income earlier, before mandatory RRIF withdrawals become larger in your 70s and 80s. That can reduce the risk of future tax compression, where too much income is forced into later years and pushes up the household tax burden.

Your TFSA can be especially valuable here. It gives you a source of cash flow in higher-income years without adding more taxable income on top.

Do not ignore home equity and tax pressure

For many affluent Ontario households, the home is too large a balance sheet item to leave out of the conversation. That does not mean it must be used. It means the role of the home should be decided intentionally.

In practice, most retirement plans fall into one of three approaches:

• Legacy-first: the home is meant to be kept and passed on
• Backup plan: the home is not part of the base retirement income strategy, but it remains an option if circumstances change
• Planned downsize: the home is expected to be converted into usable capital later

Clarity matters. If you exclude home equity completely, you may force the portfolio to do more work than necessary. If you assume a future sale without any real plan, the decision can become rushed and emotionally difficult later.

There are also two tax issues that deserve close attention.

First is the OAS recovery tax. For 2026, the repayment threshold begins at $95,323 of net world income per person. This is measured individually, not by household. A large pension, significant RRIF withdrawals, or a realized capital gain can push one spouse over that line more easily than many expect.

Second is what might be called RRIF pressure. By the end of the year you turn 71, RRSPs generally must be converted to RRIFs, and minimum withdrawals begin. Those minimums increase with age. A plan that feels tax-efficient at 65 can become much less efficient at 80 if forced withdrawals stack on top of pension income and government benefits.

These are not technical details to leave until later. They are part of what determines whether the retirement paycheque remains efficient and sustainable over time.

Final thoughts

If you want $10,000 a month after tax in retirement, the answer is rarely one portfolio number. It is a coordinated income plan.

The real work is understanding how much of that monthly paycheque will come from CPP, OAS, and pensions, how much needs to come from investments, how taxes affect each source, and how those pieces should be timed across different stages of retirement.

A well-built plan makes it easier to see what is funding what. It also helps you spot problems earlier, whether that is overreliance on taxable withdrawals, a non-indexed pension that loses purchasing power, future OAS clawback exposure, or RRIF minimums that may create unnecessary tax pressure later.

If you want help building a retirement income plan that coordinates your pensions, government benefits, investments, withdrawal strategy, and long-term tax picture, Ferguson Financial Planning can help you structure it with greater clarity and confidence.