5 Big Mistakes Made By Canadian Retirees (And How To Fix Them)

Summary

The video highlights five retirement-planning mistakes that can reduce Canadian retirees’ income or increase taxes. Its central message is to coordinate CPP/OAS start dates, RRSP/RRIF withdrawals, TFSA use, investment risk, and taxes rather than making each decision in isolation.

Key 2026 figures cited

• CPP at age 65: Average new retirement pension of $858.34/month; maximum stated as approximately $1,507.65/month.
• OAS: Full pension of $762.50/month for ages 65–74 and $838.75/month for age 75 and older, for October–December 2026. Average CPP plus full OAS is about $1,620/month at age 65.
• Inflation: Statistics Canada’s August 2026 year-over-year reading is given as 3.0%; FP Canada’s long-term planning assumption is 2.1% annually.
• FP Canada long-run assumptions: 3.2% annual return for fixed income and 6.3% for Canadian stocks. These are planning assumptions, not guaranteed returns.

The five mistakes and suggested fixes

1. Taking CPP early by default

• CPP is reduced 0.6% per month before age 65—7.2% per year, or 36% at age 60—and increased 0.7% per month after age 65, up to 42% more at age 70. There is no further increase for delaying beyond 70.
• For a $1,000 age-65 CPP pension, the video gives estimates of about $640/month at 60, $1,000 at 65, or $1,420 at 70.
• The video estimates that payments from starting at 60 catch up around age 74 compared with starting at 65. Waiting from 65 to 70 catches up around age 82. These estimates are before inflation and tax.
• CPP payments rose 2.0% in January 2026. OAS can also be delayed: 0.6% per month, up to 36% at age 70. The video estimates that a $762.50 OAS payment would become about $1,037/month if delayed to 70.
• Starting early may suit someone with serious health issues or insufficient savings; delaying may suit a healthy person with other funds to live on. Consider spouses’ survivor benefits and check personal estimates through Service Canada. Quebec workers should check QPP; the video says QPP can be delayed to 72.

2. Planning for too short a retirement or holding everything in cash/GICs

• The 2026 longevity figures cited give:
  • A 25% chance that a 65-year-old man reaches 94.
  • A 25% chance that a 65-year-old woman reaches 96.
  • A 25% chance that one member of a 65-year-old couple reaches 98.
• At 2.1% annual inflation, $4,000/month at age 65 would require about $6,725/month at age 90 to buy the same things.
• In the video’s example, $400,000 earning 3.2% with $2,000/month withdrawals lasts about 23 years, to roughly age 88 for someone retiring at 65. Inflation-adjusted withdrawals would shorten that period.
• Suggested approaches include planning to at least age 95, accounting for changing spending and irregular costs, keeping several years of near-term spending in safer holdings, and retaining growth investments appropriate to the person’s risk tolerance.

3. Leaving the RRSP untouched until conversion to a RRIF

• By the end of the year a person turns 71, an RRSP must be withdrawn, transferred to a RRIF, or used to buy an annuity.
• RRIF minimum withdrawal rates cited:
  • 5.28% at 71
  • 5.82% at 75
  • 6.82% at 80
  • 8.51% at 85
  • 11.92% at 90
  • 20% from age 95
• A younger spouse’s age may be used to calculate lower minimums. No minimum is required in the year the RRIF is opened.
• In the video’s example, a $600,000 RRIF at 71 requires a $31,680 minimum withdrawal. With a $45,000 workplace pension, $14,400 CPP, and $9,150 OAS, total income is $100,230.
• The OAS recovery tax is said to start at $95,323 of 2026 net income, with 15 cents repaid per dollar above the threshold. On the example income, that implies about $736 of recovery tax; the spoken calculation appears garbled. Full OAS recovery is cited at about $155,320 for ages 65–74 and $161,320 for ages 75 and older.
• Consider planned RRSP withdrawals in lower-income years, often before CPP/OAS begin, to reduce later mandatory RRIF withdrawals. The appropriate amount depends on tax brackets, province, and other income. RRIF balances may also be included in income on the final tax return after the last spouse dies.

4. Underusing the TFSA

• The annual TFSA limit for 2026 is $7,000. The video states that someone eligible since 2009 with no prior contributions could have about $109,000 of cumulative room. For two eligible spouses, that is about $218,000 combined.
• TFSA growth and withdrawals are tax-free, and withdrawals do not count as income for OAS or GIS. Withdrawn room returns on January 1 of the following year. There is no age limit on contributions if room is available.
• A TFSA can hold cash, GICs, bonds, stocks, and ETFs. The choice should reflect when the money is needed. The video also suggests naming a spouse as successor holder.
• Retirees with surplus RRIF withdrawals may be able to contribute the unneeded amount to available TFSA room to shelter future growth from tax.

5. Making large, unplanned withdrawals

• RRSP withholding tax outside Quebec is:
  • 10% on withdrawals up to $5,000
  • 20% on amounts over $5,000 and up to $15,000
  • 30% on amounts over $15,000
• In Quebec, the federal withholding rates cited are 5%, 10%, and 15%, with provincial withholding added.
• Withholding is only an instalment, not the final tax bill. A large withdrawal can push income into a higher bracket or trigger OAS recovery. The video’s example says a $20,000 RRSP withdrawal has $6,000 withheld outside Quebec.
• Splitting a large expense across tax years—for example, $10,000 in December and $10,000 in January—can spread taxable income over two returns. The video also recommends using TFSA funds for part of a large expense where appropriate.
• RRSP/RRIF withdrawals count toward GIS income; TFSA withdrawals do not. The maximum single-person GIS cited for October–December 2026 is $1,138.90/month, with income below $23,112/year required to receive any GIS. People near the cutoff should be especially cautious about withdrawals.
• A 1–2-year cash cushion may reduce the need to sell investments after a market decline. Refill it in stronger markets when practical.

Additional tax-planning point

Eligible pension income can be split between spouses, with up to 50% allocated to the other spouse on their tax returns. RRIF payments qualify from age 65; some workplace pension income can qualify earlier.

Splitting may reduce household tax and help manage OAS recovery, but CPP/QPP and OAS cannot be split under this approach. Both spouses elect annually using Form T1032. Each spouse with eligible pension income may claim a tax credit on up to $2,000 of it.

Suggested planning sequence

1. Check CPP estimates at ages 60, 65, and 70, or check QPP through Retraite Québec.
2. Map income and spending through at least age 95, including a 2.1% annual inflation assumption.
3. Project RRIF minimums and assess whether earlier RRSP withdrawals could reduce future taxable income.
4. Verify TFSA contribution room and consider using it for money not currently needed.
5. For couples, assess pension splitting and file Form T1032 when appropriate.
6. Plan withdrawals before major expenses and maintain a cash reserve for market downturns.

Disclosures and sources

The subtitles do not include an explicit “not financial advice” statement. They do say rules can vary by province and household, and recommend having a qualified financial planner or tax professional test the approach against individual circumstances.

Presenter/source: Canadian Money With Liam (Liam). Organizations cited include Employment and Social Development Canada, Service Canada, the Canada Revenue Agency, FP Canada, the Institute of Financial Planning, Statistics Canada, and Revenu Québec.