Still working when your retirement savings are already ‘good enough’ to let you leave? Here are 3 hidden costs Canadians will pay

But delaying retirement even after your financial adviser has confirmed it’s a practical decision to make has real implications — ones that rarely show up on a spreadsheet. Here are three hidden costs of working too long that can have serious ramifications.

1: The cortisol tax

Life expectancy isn’t the same as healthy life expectancy. According to Statistics Canada, as of 2024, the average life expectancy at birth in Canada is 82.16 years — 80.30 for men and 84.29 for women. Further, the health-adjusted life expectancy (HALE) for Canada in 2023 was 15.3 years at age 65. That represents the average expected number of healthy years remaining for older adults.

However, the World Health Organization (WHO) estimates that Canadians spend roughly 12 to 13 of those final years in less-than-full health — meaning healthy life expectancy is closer to 69.

Simply put, you can’t expect the same vitality, strength and stamina in your 70s or 80s as you can in your 60s.

With this in mind, spending one extra year of your 60s at a desk represents a real hidden cost. Worse yet, those extra meetings and deadlines are adding stress and cortisol to your system that could further chip away at your remaining healthy years. This is one of the most compelling reasons to consider retirement when your finances say you’re ready — not a year or two later.

It’s also a reason to plan seriously for long-term care (LTC). Canada’s provincial health-care systems cover many medical costs, but publicly funded long-term care beds come with lengthy wait times in most provinces. Long-term care facilities can cost between $1,300 and $3,400 a month for a subsidized nursing home bed, while private facilities can exceed $6,000 monthly.

Without proper planning, those costs could deplete a retirement fund far faster than expected — and in many cases, the financial burden shifts to family members.

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2: The window on tax strategies is closing

Retiring a little earlier than planned — even if your nest egg is only “good enough” — opens up meaningful opportunities to reduce your tax burden over the long term.

For Canadians, one of the most powerful of these is the Registered Retirement Savings Plan (RRSP) meltdown strategy. Before your RRSP must be converted into a Registered Retirement Income Fund (RRIF) by December 31 of the year you turn 71, there’s often a window in your early-to-mid retirement years when your income — and therefore your tax bracket — is lower than it will be once mandatory RRIF withdrawals kick in.

During this window, you can withdraw from your RRSP deliberately, at a lower marginal rate, and shift that money into a Tax-Free Savings Account (TFSA). Future growth and withdrawals from the TFSA are tax-free, which means less taxable income when RRIF minimums begin and when CPP and Old Age Security (OAS) payments start.

Capital gains timing is another consideration. Under current Canadian tax law, individuals include 50% of capital gains in their taxable income — the so-called 50% inclusion rate. Realizing gains during a lower-income year in early retirement can result in substantially less tax compared to realizing those same gains while still earning a full employment income.

If you stay at work for an additional year, employment income can push you into a higher tax bracket, making all of these strategies less effective or even unavailable.

Whether or not the tradeoff is worthwhile depends on your personal financial situation. But this planning window is one of the most overlooked arguments for retiring when your numbers work — not just when they’re perfect.

If you don’t currently have a financial adviser, now is a good time to find one. A fee-only Certified Financial Planner (CFP) can model your specific situation, including RRSP meltdown strategies, TFSA optimization and tax-bracket management. FP Canada maintains a public registry of CFP professionals at fpcanada.ca.

3: The OAS clawback trap

This one is a hidden cost — and a potentially severe one for Canadians who plan to collect OAS while still working or drawing employment-level income.

OAS isn’t simply taxable income — it’s subject to a recovery tax (commonly called the OAS clawback) that takes back 15 cents for every dollar when an individual’s net income rises above a specific threshold. For 2026, the threshold is $93,454. OAS payments are fully eliminated once net income reaches $152,062 for people aged 65 to 74, and $157,923 for those 75 and older.