Jul 7, 2026
More Canadians are trying to retire earlier than the traditional age of 65, even though the national trend is moving the other way. In fact, the average retirement age in Canada climbed to 65.4 in 2025, the highest it’s been in at least two decades. Could Bob — who is currently 50 years old, earns $150,000, and has $500,000 saved in an RRSP, to which he contributes 6% of his salary annually with no employer match — retire at 62?
While this scenario is hypothetical, it is eminently relatable to anyone who believes they have saved diligently and are looking to start their golden years as early as possible.
Will Bob reach his number?
At a 7% average annual return, Bob’s $9,000 yearly contribution grows his $500,000 balance to about $1,287,096 by age 62. That’s a healthy nest egg on paper — but whether it’s enough depends on what Bob needs to replace from his working income.
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Applying the commonly used 4% withdrawal rule — spend 4% of the portfolio balance in year one, then adjust for inflation each year thereafter — Bob’s account would generate about $51,483 in year one of retirement, or $4,290 per month. On its own, that income falls within the acceptable $3,500 to $5,000 monthly income for a single retiree. However, there are other sources of income that Bob can expect in his 60s, mainly the Canada Pension Plan (CPP) and Old Age Security (OAS).
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Where the Canadian math changes
A Canadian in Bob’s position would not be able to qualify for OAS at 62, as it cannot be claimed before the age of 65.
The Canada Pension Plan (CPP), on the other hand, can start as early as 60. Taking it early comes at a cost: CPP payments shrink by 0.6% for every month claimed before 65, up to a maximum reduction of 36% at age 60. For someone who retires at 62, that works out to a permanent reduction of about 21.6%.
Applying that reduction to the 2026 maximum monthly CPP payment of $1,507.65, a 62-year-old with a strong contribution history would collect roughly $1,182 a month, or about $14,184 a year — and that’s the high end. Thus Bob, retiring at 62, would be relying on RRSP withdrawals and a reduced CPP payment alone for three years, with no OAS top-up until 65. Only once he turns 65 would the maximum OAS payment of $742.31 a month, about $8,908 a year, become available, on top of his now permanently reduced CPP.
Combining a 4% RRSP withdrawal with reduced CPP gets a Canadian retiree like Bob to somewhere in the neighbourhood of 41% to 46% of pre-retirement income at 62 — below even the more conservative 60% to 70% income-replacement benchmark Canadian planners tend to use.
Upping RRSP contributions could help close the gap
Bob’s original fix to further cushion his retirement is contributing more to his RRSP. The contribution limit for 2026 is 18% of the previous year’s earned income, up to a maximum of $33,810. Furthermore, any unused contribution room carries forward indefinitely, so someone who under-contributed in their 30s and 40s may already have significant banked room to use in a higher-income year.
A Canadian saver could also split contributions with a spouse through a spousal RRSP, or lean on a Tax-Free Savings Account (TFSA) to build a pool of withdrawals that don’t count as taxable income — which matters, since OAS is clawed back once net income passes $95,323 in 2026.
“Let’s just retire a little bit — let’s retire Fridays if you can,” said Bill McBay, a certified financial planner at T.E.A.M. Financial Solutions with Sun Life Financial, describing the phased approach he now recommends to clients who are financially squeezed but eager to step back from full-time work. Rather than treating 62 as a hard finish line, a partial retirement — dropping to four days a week, or shifting to contract work — can stretch RRSP savings, delay CPP and OAS, and soften the three-year income gap that can trip up Bob and other early Canadian retirees.
Key takeaways for Canadians planning an early retirement
- Run your own numbers before picking a retirement age — a 4% RRSP withdrawal plus early CPP rarely replaces 60% of a pre-retirement salary on its own
- Remember OAS doesn’t start until 65 — budget for the CPP-only years if retiring before then
- Check your CPP break-even age — delaying from 60 to 65 typically pays off if you expect to live past your mid-70s
- Use carry-forward RRSP room in high-income years
- Consider a phased or partial retirement to bridge the gap between quitting full-time work and collecting full government benefits
- Review your plan with a financial advisor annually, since small changes in return assumptions or spending can shift your realistic retirement date by years
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Christy Bieber a freelance contributor to Moneywise, who has been writing professionally since 2008. She writes about everything related to money management and has been published by NY Post, Fox Business, USA Today, Forbes Advisor, Credible, Credit Karma, and more.
