Many Canadians think they need $3 million or more to retire on $10,000 per month. However with the right strategy, that number might be much lower. In this post, we’ll show how retirees can actually achieve this lifestyle with smart planning, and avoid some costly mistakes along the way.
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Their Goal
- Retirement income: $10,000/month (after-tax lifestyle)
- Time horizon: 25+ years
- Common assumption: $3 million needed
But as we’ll show, the true number depends on multiple factors—tax strategy, government benefits, spending phases, and the types of accounts you draw from.
The Problem with Simple Math
$10,000/month = $120,000/year. Seems straightforward.
But that’s:
- Before taxes
- Before inflation
- Before account type impacts
For example, if inflation averages 2.5%, you’ll need over $19,000/month in 25 years to maintain the same lifestyle.
Key Takeaway: Always plan in today’s dollars, then factor in inflation and taxes.
The Right Way to Estimate What You Need
Most people use the 4% rule: $120,000/year requires $3 million.
But that assumes:
- No CPP, OAS, or pensions
- Spending stays constant for 30 years
- No tax planning
Example:
If CPP + OAS + pension cover $5,000/month, you only need to draw $60,000/year from your investments. That brings the savings goal down to $1.5 million.
And don’t forget: RRSPs are fully taxable, while TFSA income is tax-free.
Where Your Retirement Income Will Come From
1. CPP & OAS
- Reliable, inflation-indexed income
- Average couple receives over $3,000/month
Strategy Tip: Use this for core expenses like housing and groceries.
2. RRSPs
- Fully taxable in retirement
- Waiting until 72 can trigger large RRIF withdrawals and OAS clawbacks
Actionable Tip: Consider withdrawals in your 60s to smooth out your tax bill.
3. TFSAs
- Tax-free income
- Won’t affect OAS or tax brackets
Use for: Large one-time expenses or topping up income tax-efficiently.
4. Non-Registered Accounts
- Interest = fully taxable
- Dividends = tax-preferred
- Capital gains = taxed at 50%
Tip: Match the right investments to the right accounts.
Why Tax Strategy Changes Everything
Two retirees with identical lifestyles can have drastically different tax bills—just based on where they pull money from.
Example:
Retiree A blends TFSA, RRSP, and dividends = $11K tax
Retiree B draws only from RRSP = $32K tax
Planning Tip: Pair withdrawals from RRSPs and TFSAs to keep your tax rate level.
How to Invest in Retirement
You still need growth—but also stability.
Bucket Strategy:
- Bucket 1: 12–24 months cash
- Bucket 2: 3–5 years in bonds/dividends
- Bucket 3: Growth investments
This protects near-term income and reduces panic during market downturns.
Pitfalls to Avoid
- Ignoring Inflation: Your $10K today won’t stretch the same in 20 years. Build in 2–3% increases.
- RRSP Overload: Too much in RRSPs can hurt you later. Diversify early.
- Flat Spending Assumptions: Plan for Go-Go, Slow-Go, and No-Go years.
Final Thoughts
You don’t need $3 million to retire on $10K/month, however you need a plan. Tax strategy, withdrawal order, and investment structure all play a huge role in how sustainable your income will be. If you want to create a plan visit our website and book a free consultation with us.
