The 4% Rule: How Much Do You Need?

The 4% rule is a retirement guideline: if you save 25 times your annual spending, you can safely withdraw 4% per year and have your money last through retirement. Example: If you spend $50,000/year, you need $1.25 million. This assumes a 50/50 stock/bond portfolio and a 30+ year retirement. In Canada, apply this to your spending AFTER CPP and OAS.

CPP, OAS, and Retirement Income in Canada

CPP (Canada Pension Plan) provides ~$760–$1,364/month at 65+ depending on contributions. OAS (Old Age Security) adds ~$727/month at 65+ (subject to clawback above ~$90,000 income). Together, CPP+OAS might cover 50% of retirement spending for average Canadians. You need savings to fill the gap. Higher earners should expect OAS clawback and plan accordingly.

RRIF Conversion and Withdrawal Rules

At age 71, you must convert your RRSP to an RRIF (Registered Retirement Income Fund) and take mandatory withdrawals starting at 5.4% annually. This increases over time: at 75 it's 7%, at 80 it's 8.75%. Plan for RRIF withdrawals in your tax planning — they're fully taxable. Spousal RRIFs can lower clawback and split income in retirement.

Sequence of Returns Risk

Market returns in your first 5 years of retirement matter most. A market crash right before retirement (or in year 1) is dangerous with the 4% rule. To mitigate: hold 2–3 years of spending in cash/bonds, keep working 1–2 years longer if markets decline before retirement, or use a dynamic withdrawal strategy that adjusts for market performance.

Canadian Retirement Income Sources

• CPP: ~$760–$1,364/month (indexed)
• OAS: ~$727/month at 65 (indexed, clawback above ~$90k)
• Personal RRSP/TFSA: Your primary savings vehicle (save 25x annual spending)
• Pension (if available): Defined benefit pensions reduce savings needed
• Real estate: Home equity can be downsized or borrowed against