Do you have $500K to $5 million saved up for retirement? Here’s why that might not be enough to feel financially secure

Wealth at this level puts you in what financial planners often call the “mass affluent” category — individuals with significant investable assets, but not quite enough to qualify for the personalized, white-glove wealth management services reserved for those with $10 million or more. In Canada, “mass affluent” is generally described as individuals with investable assets between $100,000 and $1 million. And, according to a 2020 report by Investor Economics, there are approximately 3.8 million mass affluent households in the country, accounting for roughly 24% of all households (1).

However, individuals with assets between $1 million and $5 million are in a more precarious position: They’re too wealthy for cookie-cutter, out-of-the-box financial planning, but typically below the thresholds for private banking or fully customized portfolio management.

Simply put, your wealth places you in an awkward position — and the retirement risks you face differ from both people just starting out and individuals with significantly more. Here are some of the unique challenges you might face, and how to address them.

Liquidity

For the mass affluent, liquidity could be a key risk, especially if home equity or real estate is a significant portion of your net worth.

The inability to quickly or cheaply convert assets into cash can be a challenge if you’re ever faced with an emergency. Plus, it can also affect your assumptions about cash flow and withdrawals in your retirement plan.

Coincidentally, 36% of millionaires don’t consider themselves “wealthy,” according to a Northwestern Mutual survey (2). If that resonates with you, consider diversifying your portfolio into more liquid assets, such as exchange-traded funds (ETFs) or bonds, to bolster your finances in retirement.

Longevity risk

Life expectancy has been steadily rising in Canada, and that has created a significant new challenge for retirement planners.

At age 65, Canadians can expect an additional 19.6 years for men and 22.2 years for women, according to Statistics Canada’s “Health of Canadians Report” (3).

A longer lifespan means more time to enjoy retirement and spend time with family, but it also means more time to experience inflation — and a higher risk of developing health concerns that require care.

At a steady 3% annual inflation rate, it takes nearly 23 years for prices to double. In other words, a $2 million nest egg could have half of today’s purchasing power if you retire at 62 and die at 85.

Amplifying this risk is the reality that your health care needs are likely to rise as you age, and the cost of care is rising faster than the general economy. The Canadian Institute for Health Information (CIHI) projects that health care spending in Canada will reach $399 billion in 2025 — growing nearly 2 percentage points faster than the economy (4).

Simply put, underestimating inflation, your lifespan or health-care costs could significantly increase your chances of outliving your money, even if you’re a multi-millionaire. That’s longevity risk.

Fortunately, there are several tools available to Canadian retirees to help offset this possibility.

Unlike their American counterparts, Canadians don’t have access to a Health Savings Account (HSA) — a tax-sheltered vehicle specifically for medical expenses. But a Tax-Free Savings Account (TFSA) can serve a similar purpose. TFSA contributions grow tax-free, withdrawals are never taxed and the funds you receive don’t affect your eligibility for government benefits. Intentionally building a dedicated TFSA reserve for health-care costs is one of the most effective strategies available to Canadian retirees.

For longevity risk specifically, a life annuity — a contract purchased through a Canadian licensed insurer — can provide guaranteed income for as long as you live, regardless of market conditions or how long your other savings last. Retirees are revisiting annuities as a way to mitigate outliving their retirement savings, according to the Canadian Life and Health Insurance Association (CLHIA) (5). A deferred annuity, in particular, can be structured to begin payments later in life — protecting you if you live into your late 80s or 90s.

Tax planning

Mass affluent retirees often assume their tax burden shrinks once they stop working. In reality, it can get worse.

In Canada, the issue is the deferred tax liability sitting inside Registered Retirement Savings Plans (RRSPs) — investment accounts that were tax-advantaged on the way in are fully taxable on the way out. The pressure to withdraw begins no later than the end of the year you turn 71, when your RRSP must be converted to a Registered Retirement Income Fund (RRIF) or used to purchase an annuity (6).

Most people take the RRIF route, as it allows you to retain control over how your savings are invested and the amount of income you can draw down (7). But that flexibility comes with a catch: You must withdraw a minimum percentage each year, and that percentage increases as you age. The minimum withdrawal rate when you turn 71 is 5.28% of the fund’s total assets, rising to 5.40% the following year and increasingly each year thereafter (7).

For someone with $2 million in a RRIF, the mandatory first-year minimum withdrawal alone could exceed $105,000 — taxed as ordinary income at your marginal rate, whether you need the cash or not. As balances remain large, so do mandatory withdrawals, and this often pushes retirees into higher tax brackets than initially expected.

The cascading effects are where things can sting the most. Higher income can trigger the Old Age Security (OAS) pension recovery tax — commonly called the OAS clawback. In 2025, the clawback begins once your net income exceeds $93,454, with the Canada Revenue Agency (CRA) reducing OAS benefits by 15 cents for every dollar above that threshold (8). If your income reaches approximately $151,668 (for those aged 65 to 74), your entire OAS benefit would be clawed back (8).

Canada Pension Plan (CPP) payments are also fully taxable, which means stacking CPP, RRIF withdrawals and any other income can quickly create a significant tax surprise in retirement.

Partial RRSP “meltdown” strategies — gradually drawing down your RRSP in lower-income years before age 71 to reduce the size of eventual mandatory RRIF withdrawals — can help. So can pension income-splitting with a spouse, which allows up to 50% of eligible pension income (including funds from an RRIF if you are 65 or older) to be allocated to a lower-income spouse for tax purposes. And strategically drawing down a TFSA instead of an RRIF during higher-income years can help keep you below the OAS clawback threshold.

The terrain is complex, and the amounts and timing of these strategies heavily depend on your individual circumstances. Working with a fee-for-service certified financial planner (CFP) — one who charges a flat fee or hourly rate, rather than earning commissions — is often the most effective way to get objective guidance on managing your RRIF, TFSA and OAS strategies together.

What Canadians in this bracket should do next

If your net worth falls in the $500,000 to $5 million range, here are some practical steps to protect your retirement:

Review your liquidity. Know how much of your net worth is tied up in illiquid assets like real estate. Make sure you have enough in cash equivalents or easily liquidated investments (GICs, ETFs, bonds) to cover at least 12 to 24 months of expenses without selling property.

Model your longevity. Use a conservative assumption — plan for at least 25 to 30 years in retirement. Tools like the federal government’s Canadian Retirement Income Calculator can help you model different scenarios.