5 retirement mistakes Canadians make in the planning stages they can’t undo later — and how to avoid them

As Vettese explains, the average length of retirement in Canada is roughly 20.5 years — and the potential to make mistakes is high. But the author of four books on retirement planning, most notably the best seller, Retirement Income for Life, isn’t discouraged. He believes that with some foresight and the right planning, every Canadian retiree can dramatically reduce the risk of going off-course and end up truly living out their golden years.

To help, here are the crucial mistakes to watch for — and avoid.

Mistake #1: Claiming CPP and OAS at the wrong time

The timing of your Canada Pension Plan (CPP) and Old Age Security (OAS) claims is the most crucial financial decision you'll ever make — and you only get one shot to get it right.

CPP can be taken as early as age 60, but claiming before the standard age of 65 reduces your monthly payment by 0.6% for every month you collect early — up to a maximum reduction of 36% if you start at 60 (2). On the other hand, delaying CPP beyond 65 boosts your benefit by 0.7% for each month you wait, to a maximum increase of 42% at age 70 (2).

OAS is available from age 65 (with some exceptions for those born before 1958). Like CPP, deferring OAS past 65 — up to age 70 — increases your monthly payment by 0.6% for each month of delay, for a maximum boost of 36% (3).

In both cases, you only get one shot at this decision. Before making it official, weigh your household budget, your health, your life expectancy and the rest of your income plan carefully before locking in a start date.

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Mistake #2: Poor tax planning in early retirement

The first five years of retirement can be a golden window for tax planning — especially if you retire before converting your Registered Retirement Savings Plan (RRSP) to a Registered Retirement Income Fund (RRIF), which must happen by December 31 of the year you turn 71 (4).

If your income drops significantly in the early years of retirement, you may find yourself in a lower tax bracket. The window between retirement and age 71 is a smart time to make strategic RRSP withdrawals — before you're required to convert to a RRIF and take mandatory minimums. By drawing down on your registered savings while you're in a lower tax bracket and moving the after-tax proceeds into a Tax-Free Savings Account (TFSA), you can reduce what you'll owe over your lifetime and soften the tax hit of future RRIF withdrawals (5).

Ignoring this window — or failing to plan ahead for your taxes in early retirement — can create ripple effects that significantly increase your taxes later, when RRIF minimums are larger and your income may be higher.

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Mistake #3: Squandering your healthiest years

There's a reasonable chance the first years of your retirement will also be your most physically capable.

Statistics Canada reports the average Canadian's health-adjusted life expectancy at birth is approximately 66.9 years as of 2023 (6). That means if you retire at 65, you may potentially have a short time of peak-health years ahead. If you've dreamed of hiking the Inca Trail, cycling across Europe or finally tackling that bucket list, the case is strong for pursuing those experiences in your early 60s rather than waiting for your 70s or 80s.

In other words: Don't delay the activities that demand the most physical ability.

Mistake #4: Not planning for medical costs and long-term care

Canada's public healthcare system covers many medical expenses — but it doesn't cover everything, and long-term care (LTC) is one service that's largely overlooked.

Provincial long-term care programs are means-tested, and look widely different depending on where you live — and most require residents to contribute to the cost of their care, around 22% (7). In Ontario, for example, a long-term care home can run between $25,000 to around $36,000 a year, and the wait list for a publicly funded bed can stretch on for years (8).

Many Canadians assume provincial programs will pay most of their future care costs, but the reality is that personal savings, home equity and private LTC insurance are often necessary to cover costs. A 2023 survey by the Canadian Life and Health Insurance Association (CLHIA) found that less than 1% of Canadians have a long-term care plan in place for covering long-term care expenses (9).

A wiser approach is to build a realistic plan for medical and long-term care needs in your 50s and early 60s — ideally with the guidance of a qualified financial adviser.