Retirement in Canada is undergoing a dramatic transformation. No longer viewed as a final destination, retirement has become a dynamic new chapter shaped by changing expectations, longer lives, and shifting responsibilities. Today’s retirees and those planning ahead, are redefining what this stage of life looks like. Canadians are increasingly focused on maintaining their health so they can fully enjoy their later years, and many are assuming a greater role in financing their future as traditional employer pension plans become less common. This makes it more important than ever to put a thoughtful retirement plan in place and begin considering how best to save for the years ahead.

How to plan a meaningful retirement

A meaningful retirement plan starts with identifying what you truly want your next chapter to look like. For some, that may mean becoming debt-free, maintaining a strong emergency fund, traveling, preparing for future health-care needs, pursuing a long-held passion, or creating a legacy for loved ones.

The Edward Jones My Priorities Quiz is a helpful first step in clarifying what matters most to you, and it’s valuable to have your partner or close family members complete it as well. Once we understand your priorities and the reasons behind them, we can work together to explore what’s driving those goals and begin shaping a plan that aligns with your life. This process helps you establish or refine your objectives across health, family, purpose, and finances.

Once you complete the My Priorities Quiz, you may find that some priorities become goals in and of themselves, such as paying for education for yourself or a loved one or building and maintaining an emergency fund. Other priorities may compete with retirement goals and should be considered alongside them based on what matters most to you. Some goals, like maintaining a healthy lifestyle or traveling, may require adjustments to your retirement budget. A common consideration for many Canadians is whether to focus on saving for retirement or putting additional money toward their mortgage. Our article Mortgage or RRSP: What Should You Focus On? explores this decision in more detail.

Choosing a retirement account

One of the most important steps in building your retirement savings is selecting the right account. Canada offers several tax-advantaged options, each designed to help you grow your money in different ways. Understanding how the different account options work can help you make informed choices that align with your financial goals and life stage.

RRSPs

Registered Retirement Savings Plans (RRSP's) are often considered a cornerstone of retirement savings. An RRSP is a Registered Retirement Savings Plan that was designed to help Canadians build financial security for their later years. Contributions to an RRSP are tax-deductible, meaning the amount you contribute can be subtracted from your taxable income for that year, or carried forward to deduct in a future year. The investments held inside the plan, whether they’re stocks, bonds, mutual funds, exchange-traded funds (ETFs), or guaranteed investment certificates (GICs), grow tax-deferred, allowing your savings to compound more efficiently over time.

Depending on your situation, it may make sense to invest in a spousal Registered Retirement Savings Plan (RRSP). A spousal RRSP is a special type of RRSP for legally married or common-law partners in which one spouse contributes and the other spouse withdraws. As with an individual RRSP, the contributing spouse is entitled to a tax deduction when the contribution is made. However, with a spousal RRSP, it is the spouse who withdraws, not the spouse who contributed, who is taxed on the withdrawal. This is the essence of the income-splitting strategy offered by a spousal RRSP, one spouse receives the deduction up front, while the other spouse pays the tax upon withdrawal. For specifics, visit Spousal RRSPs: Tax-smart retirement planning to review the logistics of this plan.

Group RRSPs

Another great way to save for retirement is to take advantage of a Group Registered Retirement Saving Plan through work. Group RRSPs are employer sponsored, and you generally save into a Group RRSP through payroll deductions. Your employer may offer to match your contributions up to a set limit. Taking advantage of any matching contributions through your employer is a great way to take advantage of this opportunity. Group RRSPs require you to work with the sponsor (investment firm) chosen by the employer and you may be limited in the investment options you have available. Other than the setup of the Group RRSP they work in the same way as a regular RRSP.

By December 31 of the year you turn 71, any RRSP, Group RRSP, or Spousal RRSP must be converted to a Registered Retirement Income Fund (RRIF) or a spousal RRIF. Once converted, a minimum annual withdrawal from the RRIF is required based on your age. RRIF withdrawals are taxable as income in the year received, with withholding tax typically applying only to amounts withdrawn in excess of the minimum withdrawal. The actual tax payable depends on your total income for the year.

TFSAs

In addition to contributing to an RRSP, you may also want to consider investing in a Tax-Free Savings Account (TFSA) to save for retirement or other goals. A TFSA is a Canadian tax-advantaged savings and investment account designed to help you save throughout your life while allowing your money to potentially grow faster, since interest, dividends, and capital gains are not taxed, even when withdrawn. You can withdraw funds at any time and for any purpose. However, there are limits on how much you can contribute each year, and contributions are not tax-deductible at the time you make them.

If you expect to be in a lower tax bracket in retirement, RRSP's can create a meaningful long-term tax savings. However, if you expect to be in a higher income tax bracket in retirement due to increased income or inheritance, RRSPs or Spousal RRSPs may be less effective, since contributions are deducted at your current (potentially lower) marginal tax rate while withdrawals are taxed at your marginal tax rate in retirement, which may be higher. In such cases, a Tax Free Savings Account (TFSA) may be a more suitable option. In many cases, Canadians use a combination of RRSP's and TFSA's to manage saving for retirement. For additional information please review, Should you contribute to an RRSP or TFSA for retirement?

How to choose the right retirement account for you

You may want to use a combination of accounts to save for retirement, including a TFSA, an RRSP, or a non-registered (taxable) investment account. RRSPs benefit from tax-deferred growth; in other words, investments inside an RRSP compound faster because you don’t lose a portion of the returns to tax each year. This can make a noticeable difference over time compared with holding the same investments in a non-registered account. However, not all investment income is taxed equally outside an RRSP, capital gains and Canadian dividends receive preferential tax treatment. This is why many investors use an asset-location strategy, holding interest-generating investments like guaranteed investment certificates (GICs) and bonds inside an RRSP, while keeping growth-oriented investments in non-registered accounts. This approach helps maximize the tax advantages of an RRSP while preserving tax efficiencies available elsewhere.

We can help

To find the right strategy that will work with you, speak with an Edward Jones Financial Advisor, who can put a financial plan in place for you.