At what age will you retire?
While 65 is the traditional age of retirement for many people, in reality, Canadians retire much earlier and much later.
Age 65 is often when people start receiving Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) and Old Age Security (OAS) payments.
But along with the financial decisions about retirement, you need to decide how you’re going to spend your time once you’ve stopped working full time.
Retirement is a great time to focus on your health and wellness. Not going to work every day may be easier on your body. You’ll also have more free time to exercise or pick up an athletic hobby. Keeping active is always important and especially during your retirement years.
How retirees spend their time
As retired people age, the time they spend doing certain activities changes.
A day in the life of a retired Canadian
Average hours per day spent on each activity.
- Doing unpaid household work
- Age 55 to 64: 3.1¹
- Age 65 to 74: 3.3
- Age 75 and older: 3.2
- Engaging in civic, religious and organizational activities
- Age 55 to 64: 2.1
- Age 65 to 74: 2.3
- Age 75 and older: 1.8
- Socializing and communicating
- Age 55 to 64: 2.3
- Age 65 to 74: 2.3
- Age 75 and older: 2.2
- Engaging in leisure and physical activities
- Age 55 to 64: 2.3
- Age 65 to 74: 2.2
- Age 75 and older: 2.3
- Using technology
- Age 55 to 64: 1.7
- Age 65 to 74: 2.0
- Age 75 and older: 2.0
- Watching television and videos
- Reading
- Age 55 to 64: 1.5
- Age 65 to 74: 3.9
- Age 75 and older: 2.2
- Sleeping
What happens at age 71
You can keep contributing to your group RRSP until Dec. 31 of year you turn 71. If you have unused RRSP contribution room from previous years, you might consider using it up if you can.
If your spouse isn’t 71 years of age yet, you can also contribute to their RRSP if they have contribution room.
Before the end of the year you turn 71 you have to choose one of these 3 options for your RRSP:
Lump-sum withdrawal
You can withdraw all the money from your group RRSP. You’ll pay a withholding tax and the full amount will be included in your income which could result in you paying a large amount of tax.
Convert your group RRSP to a RRIF or LIF
Once you convert your RRSP | PDF 4.86MB to a registered retirement income fund (RRIF), you can start receiving payments from it. The CRA sets the minimum amount you must withdraw based on your age and a percentage of the market value of the RRIF.
You’ll pay income tax on any money you receive from your RRIF but not pay a withholding tax.
Available in all provinces except Prince Edward Island and Saskatchewan, life income funds (LIFs) allow you to transition locked-in savings plans (registered pension plans, locked-in RRSPs and locked-in retirement accounts (LIRAs) to income while deferring taxes. LIFs provide a flexible income that can last a lifetime. LIFs come with some rules. For example, you may need consent from your spouse to purchase a LIF. Unlike RRIFs, LIFs have both minimum and maximum annual withdrawal limits.
Purchase an annuity
You can also convert your group RRSP to an annuity which can provide you with guaranteed income for a specific period of time or the rest of your life.
You won’t pay a withholding tax and you may have to pay income tax on the money you receive from the annuity.
The RRSP withholding tax
This tax is withheld by your financial institutions when you take money out of your RRSP and passed to the CRA. The rate varies depending on how much you withdraw and the province where you live.
Enjoying the retirement experience
Take time to determine what you want your retirement to be like. Retirement gives you the chance to emphasize the things in life you didn’t have time for during your working years. Life in retirement can, and should, be everything you want it to be.