Sources of Retirement Income in Canada: Complete Guide (2025)

Retirement in Canada is evolving. With increasing longevity and rising costs, understanding your income sources is more critical than ever. Whether you’re retiring soon or just starting to plan, this in-depth guide explains all the major retirement income sources available to Canadians—from government pensions and employer plans to personal savings, annuities, and passive income. Learn how they work, how much you can expect, and how to build a secure retirement plan tailored to your goals.

1. Canada Pension Plan (CPP)

The CPP is a government-run contributory pension based on your employment income in Canada.

• Eligibility: Must have contributed during working years.
• Start Age: Can begin as early as 60 or as late as 70.
• Average Monthly (2025): $758.32
• Maximum Monthly (2025): $1,364.60

Tip: Delaying CPP to age 70 boosts payments by up to 42%.

More on CPP ↗

2. Old Age Security (OAS)

OAS is a universal pension funded by general tax revenue—not employment contributions.

• Eligibility: 65+ years old; must have lived in Canada for at least 10 years.
• Maximum Monthly (2025): $713.34 (age 65–74), $784.67 (75+)
• OAS Clawback: Starts if income > $90,997 (2025 threshold).

Strategy: Use TFSA income to avoid OAS clawback.

Learn about OAS ↗

3. Guaranteed Income Supplement (GIS)

GIS is a non-taxable supplement for low-income OAS recipients.

• Maximum (2025): Up to $1,065.47/month for single seniors
• Eligibility: Based on annual income; automatically reassessed each year

Important: RRIF withdrawals count as income and may reduce GIS eligibility.

GIS eligibility ↗

4. Employer-Sponsored Pensions

Defined Benefit (DB) and Defined Contribution (DC) pensions are provided by employers.

• DB Plan: Guaranteed income based on salary and years of service (e.g., $2,500/month for life).
• DC Plan: Invested contributions; income depends on investment performance.
• Vesting: You must work a minimum period (usually 2 years) to keep the employer contributions.

Tip: Ask for your pension statement yearly to track your retirement readiness.

5. Registered Retirement Savings Plan (RRSP)

RRSP is a tax-deferred personal retirement savings account.

• Contribution Limit (2025): 18% of prior year’s income, up to $32,490
• Tax Benefit: Contributions reduce taxable income
• Conversion: Must convert to RRIF or annuity by age 71

RRSP vs TFSA? RRSP helps high earners reduce taxes now; TFSA offers more flexibility.

CRA RRSP info ↗

6. Registered Retirement Income Fund (RRIF)

At age 71, your RRSP must be converted to a RRIF, which provides taxable retirement withdrawals.

• Minimum Withdrawal: Based on age; e.g., 5.28% at 71
• Taxable: Fully taxable as income when withdrawn
• Planning Tip: Strategically withdraw early to reduce future OAS clawbacks

7. Tax-Free Savings Account (TFSA)

TFSA income is tax-free, making it a powerful retirement tool for all Canadians.

• Contribution Limit (2025): $7,000 annually; lifetime limit approx. $103,000
• Tax-Free Withdrawals: No impact on OAS/GIS
• Best Uses: Emergency funds, dividend income, tax-free growth

Strategy: Maximize TFSA before RRSP if you’re in a lower tax bracket.

CRA TFSA info ↗

8. Annuities & Life Income Funds (LIF)

Insurance products that offer guaranteed income streams, often used with locked-in pensions.

• Life Annuity: Fixed monthly payments for life
• Indexed Annuity: Payments increase with inflation
• LIF: Required for DC pension transfers

Note: Ideal for those worried about outliving their savings.

9. Investment Income (Dividends, Capital Gains, Real Estate)

Many Canadians supplement retirement with income from:

• Stocks & ETFs: Eligible Canadian dividends taxed at a lower rate
• Bonds: More stable but lower return (3–4%/year average)
• REITs/Rental Property: Monthly income + long-term appreciation

Warning: Ensure your portfolio is diversified and aligned with your risk tolerance.

Conclusion: Build a Multi-Source Income Plan

Relying on one retirement income source isn’t enough. The most successful retirees draw from a mix of government pensions, personal savings, investments, and private plans. Start with your projected monthly needs, map out expected income from each source, and adjust your contributions or investments to close any gaps.

Need help building your custom retirement income plan? Book a free session with our licensed advisors today!

Frequently Asked Questions

1. Can I receive CPP and OAS at the same time?

Yes, you can receive both simultaneously if eligible.

2. Do TFSA withdrawals affect OAS?

No. TFSA withdrawals are tax-free and don’t count as income for OAS or GIS calculations.

3. When should I convert my RRSP to a RRIF?

By December 31 of the year you turn 71—but earlier may help manage taxes or preserve benefits.

4. Can I get GIS with investment income?

Possibly, but your total taxable income must be below certain thresholds. Excess income may reduce or eliminate GIS.

5. What is the difference between DB and DC pensions?

DB guarantees income for life; DC depends on investment growth and has no guarantees.

6. Are annuities taxable?

Yes, unless purchased with TFSA funds. Otherwise, annuity income is taxable.

7. What happens to my CPP if I die early?

Survivor and death benefits may be available to spouses or children under specific rules.

8. Can I contribute to RRSP and TFSA at the same time?

Yes, as long as you’re within annual contribution limits for each.

Related Articles

• Planning and Saving for Retirement in Canada: Your Ultimate 2025 Guide
• Personal Income Tax in Canada: Claiming Deductions, Credits & Expenses
• Understanding Annuities in Canada: A Beginner’s Guide to Retirement Income
• Employer Pension Plans in Canada: A Beginner’s Guide to Maximizing Your Retirement Benefits
• RRIF (Registered Retirement Income Fund) in Canada: A Complete Guide for 2025

References

• Government of Canada – Public Pensions
• CRA – Canada Revenue Agency
• Office of the Superintendent of Financial Institutions (OSFI)