Where Your Retirement Paycheque Comes From in Canada (2026)

Last updated Nov 2026. Benefit amounts from Canada.ca.

Most people near retirement don't ask whether they have enough. They ask where the paycheque will come from.

When you stop working, there's no single deposit every two weeks. Instead, income arrives from several sources, each with its own rules, start ages and tax treatment. Understanding the pieces makes it much easier to build a steady, tax-efficient retirement income. Here's how they fit together.

The government pieces

Canada Pension Plan (CPP)

CPP is based on your working contributions. You can start it any time from 60 to 70. It's reduced 0.6% for each month before 65 and increased 0.7% for each month after, up to 42% more at 70. For someone starting at 65 in January 2026, the maximum was $1,507.65 a month, while the average new pension was much lower (about $858 a month in mid-2026). CPP is taxable and indexed to inflation. Our article CPP at 60, 65 or 70 and the CPP start age calculator go deeper.

Old Age Security (OAS)

OAS is based on how long you've lived in Canada after 18, not on work history. You can start it from 65 to 70, with a 0.6% increase for each month you delay (36% more at 70). For October to December 2026, the maximum is $762.50 a month at 65 to 74 and $838.75 at 75 and over (Canada.ca).

The clawback. OAS is reduced by 15 cents for every dollar of net income above a threshold, officially called the OAS recovery tax. For 2026 income, the threshold is $95,323, and OAS is fully clawed back at about $155,320 for ages 65 to 74 (Canada.ca). The threshold rises with inflation each year.

Lower-income seniors may also qualify for the Guaranteed Income Supplement (GIS), which isn't taxable.

Your own savings

RRSP and RRIF

Your RRSP grows tax-deferred while you work. By December 31 of the year you turn 71, it must be converted to a RRIF (or used to buy an annuity, or cashed out, which is rarely wise because it's all taxable at once).

Once you have a RRIF, you must withdraw a minimum percentage each year starting the year after you open it. The minimum is based on your age (or your spouse's, if younger); it's about 5.28% at 71 and rises each year. Every RRIF withdrawal is taxable income. See the RRIF minimum withdrawal calculator.

You can convert earlier than 71, and some people do so to use the pension income tax credit (on up to $2,000 of eligible pension income, available from 65 for RRIF withdrawals) and pension income splitting with a spouse.

TFSA

TFSA withdrawals are tax-free and don't count as income, so they don't affect OAS, GIS or other income-tested benefits. You can keep contributing at any age; the 2026 limit is $7,000. That makes the TFSA the most flexible piece of the puzzle.

Workplace pensions and non-registered savings

A defined benefit pension pays a set amount for life. Non-registered investments are taxed on interest, dividends and realised gains, but withdrawals of the principal themselves aren't taxed.

Putting it together: a sample picture

Here's a hypothetical 65-year-old single retiree:

Numbers are illustrative. Your amounts depend on your contributions, residence history and savings.

A sensible order of withdrawals

There's no single right order, but a few common principles:

1. Fill low tax brackets early. Many retirees have a gap between retiring and starting CPP, OAS and mandatory RRIF withdrawals. Drawing RRSP money in those lower-income years can reduce the size of the RRIF later, which reduces forced taxable withdrawals and the risk of OAS clawback.
2. Consider delaying CPP and OAS. Living on savings while delaying the government pensions buys larger, inflation-indexed, lifetime income. This works best if you're healthy and have savings to bridge the gap.
3. Use the TFSA strategically. Because TFSA withdrawals don't count as income, they're useful for big one-time expenses or for keeping income below the OAS threshold in a given year.
4. Remember the estate. RRIFs left at death are fully taxable unless they roll to a spouse; TFSAs pass tax-free. That can influence which account you draw first.
5. Split income with a spouse. Pension income splitting and spousal RRSPs can lower the household's total tax.

Our retirement withdrawal calculator and how long will savings last tools let you test different mixes.

FAQ

When do I have to convert my RRSP to a RRIF?

By December 31 of the year you turn 71. Minimum withdrawals start the following year.

What's the OAS clawback threshold for 2026?

$95,323 of net world income. Above that, 15% of the excess is repaid, with OAS fully eliminated at about $155,320 for ages 65 to 74.

Do TFSA withdrawals affect OAS?

No. TFSA withdrawals aren't taxable income, so they don't count toward the OAS clawback or GIS calculations.

Can I take CPP at 60 and OAS at 70?

Yes. The two have separate start ages and decisions.

Which account should I withdraw from first?

It depends on your tax bracket, health, estate goals and whether OAS clawback is a risk. Many retirees draw some RRSP money in the early, low-income years and keep TFSAs for flexibility.

Educational only, not advice. Benefit amounts are from Canada.ca and change quarterly or yearly; withdrawal order depends on your situation. — The Finance Coach