I've done the math: I should be able to retire at 66, with $550,000 in the bank — and not a penny more. How do I make it last?

Picture the following scenario: Assume you are 56 and want to retire in 10 years with $550,000. While your savings may align with many others your age — according to Fidelity, the average Canadian aged 55 to 64 has a net worth of $873,400 across their RRSP, RSP and other investments — that doesn’t mean you’re looking at a sufficient retirement income.

While the “magic number” Canadians were targeting for many years was a million dollars in retirement, $550,000 is just about halfway to that target. If you apply the 4% rule for withdrawals to your $550,000 in savings, you get an annual income of about $22,000.

Of course, Canada Pension Plan (CPP) benefits factor into your retirement income as well; the average benefit for retired workers today is $845 per month, or $10,135 per year. That means you’d have about $32,135 per year to work with. But as of 2021, the average annual household spending among Canadians 65 and over was $76,750 according to Statistics Canada. In other words, you’d have under half the income the average couple needs.

That said, there are steps you can take to reduce your tax burden, stretch your savings and live well in retirement on a $550,000 nest egg. Here are some strategies to consider.

Use retirement accounts that minimize your future tax burden

If you won’t have a high income in retirement, it’s that much more important to minimize your payments to the CRA, legally of course, and to make the most of any tax breaks.

Until you retire, you can also help yourself by contributing to a TFSA and maxing out your RRSP tax deductions.

You can continue to contribute to an RRSP until the end of the year when you turn 71. After this point, you convert any remaining RRSP balance into a registered retirement income fund (RRIF), even if you’re still working. Be sure to check the maximum RRSP contribution limit for this year based on your income, as it is subject to change.

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Delay your CPP for larger monthly benefits

While you can begin claiming CPP at age 60, your payments decrease by 0.6% each month (7.2% per year), up to a maximum reduction of 36%. However, delaying your claim until age 70 will mean that your payments increase by 0.7% each month (8.4% per year), up to a maximum of 42% at age 70.

A larger payout could take some of the pressure off of your nest egg, allowing you to leave your savings intact longer so you can continue generating returns. These returns can also come in handy if your savings start to dwindle.

CPP benefits are also protected from inflation, due to the program's automatic cost-of-living increases. The larger your monthly benefit, the more inflation protection you gain.

Move to a province with lower costs

When you're working, you may have to live in a certain part of the country to get access to jobs in your field. In retirement, you have the freedom to move to any province you choose, which could help you lower your costs.

These are the top 5 most affordable provinces:

1. Newfoundland and Labrador
2. New Brunswick
3. Saskatchewan
4. Manitoba
5. Prince Edward Island (P.E.I.)

The lower cost of living in these provinces could help you stretch your $550,000 nest egg to cover all your retirement years.

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Consider downsizing

Whether you own or rent a home, downsizing is a great way to lower your monthly expenses. It's also a good option if you're looking to shed costs in retirement, but relocating isn't an option.

With soaring home values in Canada, homeowners in this country are now sitting on a record-breaking $4.7 trillion in home equity according to Clay Financial.This accounts for between half and two-thirds of their overall net worth. Tapping into the value of your home can help you to make up any shortfall in your retirement savings.

If you don’t own a home but are able to lower your monthly rental costs by moving to a smaller home, that could make a big difference, too. The added flexibility could buy you freedom to travel, seek new hobbies and generally have the kind of retirement you envisioned for yourself.

Sources

1. Fidelity: How much do Canadians need to save per year for retirement?

2. Government of Canada: Canada Pension Plan: Pensions and benefits monthly amounts

3. Statistics Canada: Survey of Household Spending, 2023 (May 21, 2025)

4. Clay Financial: 7 Ways To Access Your Home Equity in Canada (April 18, 2024)