Retirement Planning as a Newcomer in Canada: A Complete Guide

Retirement planning is a crucial part of any financial plan, but for newcomers to Canada, navigating the country’s retirement system can be especially challenging. Newcomers not only have to adjust to a new culture and way of life but also to a new financial and legal landscape when it comes to saving and preparing for retirement.

Our guide here today aims to provide newcomers with everything they need to know to successfully plan for retirement in Canada. By the end, you’ll learn retirement planning strategies specific to your situation as a newcomer and find answers to pressing questions like “How much do I need to retire?” and “How can I maximize my retirement income?”

With the right information and preparation, you can overcome any obstacles and ensure you retire comfortably in your new home country. Let’s get started!

What are the main components of Canada’s retirement system?

Canada’s retirement system consists of three main pillars that work together to provide retirement income:

Government Benefits

The government provides retirement income through programs like:

• Canada Pension Plan (CPP) – A contributory pension plan that provides monthly retirement benefits based on your contribution history.
• Quebec Pension Plan (QPP) – The Quebec counterpart to the CPP for Quebec residents.
• Old Age Security (OAS) – A basic pension paid to eligible seniors aged 65+ who meet residency requirements.
• Guaranteed Income Supplement (GIS) – Additional benefits for low-income OAS recipients.

Government benefits aim to replace a minimum percentage of income, providing a baseline level of retirement income for all eligible seniors.

Employer Pensions

Some companies offer registered pension plans (RPPs) as part of employee compensation packages. These supplement government benefits and provide an additional source of retirement income. The main types are:

• Defined Benefit (DB) Plans – Guaranteed payments based on earnings history and years of service.
• Defined Contribution (DC) Plans – Variable payments depending on investment returns.
• Group RRSPs – Company-sponsored group RRSP accounts.

Eligibility and vesting rules apply. Not all employers offer pension plans.

Personal Savings

Individual retirement savings vehicles like RRSPs and TFSAs allow you to build retirement wealth beyond government and employer pensions. Personal savings are especially important for maintaining your lifestyle in retirement.

This three-pillar system differs from countries where government or employer plans provide the bulk of retirement income. In Canada, individual savings play a much larger role in achieving retirement security.

For newcomers, understanding how these pillars fit together is key to developing a customized retirement plan. Learn more in the following section.

What are the main government retirement benefits in Canada?

Canada has two main national pension programs – the Canada Pension Plan (CPP) and Old Age Security (OAS) – that provide baseline retirement income alongside provincial programs like the Quebec Pension Plan (QPP):

Canada Pension Plan (CPP)

The CPP is a compulsory, contributory pension plan that aims to replace 25% of the average Canadian’s pre-retirement earnings. Both employees and employers contribute to the CPP during a person’s working years.

In 2025, the standard CPP payment for someone retiring at age 65 is $1,433 per month. You can take reduced payments as early as 60 or higher payments up to 70 (up to 42% more if you delay until 70). The benefit amount you receive is based on your lifetime contributions and the age you start collecting.

As a newcomer, you start contributing to CPP as soon as you begin working in Canada. The minimum annual earnings to contribute for 2025 are estimated to be around $3,750. Both Canadian citizens and permanent residents are eligible for CPP benefits if they have made at least one valid contribution.

Source: https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/amount.html

Old Age Security (OAS)

The Old Age Security program provides a basic pension to all Canadian citizens and legal residents aged 65+ who have lived in Canada for at least 10 years since turning 18. For 2025, the maximum monthly OAS payment is $727.67.

Your income, marital status, and years lived in Canada determine your exact OAS payment amount. Benefits start getting “clawed back” if your net income exceeds $142,609 and are eliminated entirely above $148,179.

If you delay receiving OAS past 65, your monthly amount can increase up to 36% on a deferred basis until age 70. This bonus for deferring may benefit those with other income sources in early retirement.

Source: https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/benefit-amount.html

Guaranteed Income Supplement (GIS)

The GIS provides additional benefits on top of OAS for low-income seniors. To qualify, you must be approved for OAS, be aged 65+, and meet income thresholds based on relationship status. The maximum monthly GIS in 2025 is $1,086.88 for single seniors and $654.23 for couples.

GIS eligibility and payment amounts depend heavily on your total income, including pension and investment income. GIS is aimed at the lowest-income seniors to lift them above the poverty line.

Source: https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/guaranteed-income-supplement/eligibility.html

Spousal Benefits

Both CPP and OAS provide spousal benefits if your spouse qualifies but you do not. For CPP, you can receive up to 60% of your spouse’s retirement pension. For OAS, spousal allowances can provide up to 55% of your spouse’s benefits.

Government Benefits for Newcomers

As a newcomer, you may not immediately qualify for the full OAS pension due to residency requirements. But making contributions to CPP as soon as you start working will pay off when you reach retirement age in Canada.

With 10+ years of Canadian residency, you can qualify for pro-rated OAS payments based on your years lived in Canada as an adult. The social security agreements Canada has with other countries may also help newcomers qualify.

What types of employer pension plans are available?

Some companies provide retirement income on top of CPP through registered pension plans (RPPs). The main types of employer plans are:

Defined Benefit (DB) Pension Plans

These guarantee you a set monthly payment in retirement determined by a formula, usually based on your length of service and average salary during your final years of work.

For example, a DB plan may pay 1.5% of your “best 5 years” salary for each year worked. Working there for 30 years would give you 45% (30 x 1.5%) of your average top 5 earning years.

DB plans provide predictable, stable retirement income but are getting less common as they are costlier for employers.

Defined Contribution (DC) Pension Plans

DC plans have fixed contributions from your employer paid into your retirement account annually. You choose how these contributions are invested. Your retirement income depends on the performance of your investments and how much your employer contributed to your career.

DC plans come with more risk and variability but cost employers less than DB plans. Most modern pension plans now use a DC model.

Group RRSPs

Some employers provide access to a group Registered Retirement Savings Plan (RRSP) funded through payroll deductions. Group plans have lower fees than individual RRSPs and may include matching employer contributions.

For example, your employer may automatically deposit 3% of your salary into the group RRSP each pay period and match your own contributions up to 2% of your salary. This helps you save for retirement in a tax-advantaged way.

What types of personal retirement savings options are available?

Government benefits and employer pensions provide a good base, but individual savings are still critical for most Canadians to maintain their standard of living in retirement.

Canadians have lower workplace pension coverage than in prior generations. Only about 37% of the labour force has an employer plan, down from 45% two decades ago.

With Canadians depending less on company pensions, personal savings must fill the gap. Registered accounts like RRSPs and TFSAs are important retirement savings tools.

Let’s compare RRSPs and TFSAs in more detail:

RRSPs

RRSPs are accounts that give you tax breaks for retirement savings. Some features:

• Tax deductions for contributions reduce your current taxable income.
• Tax-deferred growth means no tax on investment earnings until withdrawn in retirement.
• Pre-retirement withdrawals face significant tax penalties except for special programs like the Home Buyers’ Plan.
• At retirement, payments get taxed as income. Since you are likely in a lower tax bracket than when working, you come out ahead.

Your annual RRSP contribution room is 18% of your previous year’s earned income, up to a maximum ($32,490 in 2025). You can carry forward unused room.

RRSPs reward disciplined savers who contribute regularly over decades. The tax reduction snowballs into major retirement wealth over time.

TFSAs

Tax-Free Savings Accounts are flexible, general-purpose accounts that provide tax-free growth on savings and investments within them. Key points:

• No deduction for contributions, but your money grows tax-free.
• Annual limits are lower than RRSPs, at $7,000 for 2025. The unused room carries forward.
• Withdrawals aren’t taxed and don’t impact your eligibility for income-tested benefits.
• Flexible access to your funds at any time for any purpose.

Together, RRSPs and TFSAs form a tax-efficient 1-2 punch for retirement savings. RRSPs reward long-term discipline, while TFSAs provide flexibility.

How do RRSPs and TFSAs compare?

Let’s compare the key features side-by-side:

Some key considerations in choosing between RRSP and TFSA:

• Current tax bracket – RRSPs benefit those currently in a high bracket more.
• Anticipated retirement tax bracket – If you expect to be in a lower bracket when retired, RRSPs give you a tax break now and later.
• Flexibility needs – TFSAs allow withdrawals at any time for any reason with no tax impact.
• Eligibility for income-tested benefits – TFSA withdrawals don’t affect benefit eligibility the way RRSP withdrawals do.

Ideally, newcomers should strive to utilize both accounts based on their specific circumstances each year.

What RRSP and TFSA strategies work for newcomers?

Newcomers face unique challenges like having lower RRSP rooms and playing catch-up with retirement savings. Six effective strategies include:

Start your TFSA immediately

As soon as you get a Social Insurance Number, open and maximize your TFSA. Unlike RRSPs, you accumulate TFSA room from the year you become a tax resident age 18+.

Contributing even modest amounts builds your lifetime limit. Tax-protected growth gives you a head start on your savings.

Make RRSP contributions whenever possible

Don’t wait to have “spare cash” for RRSPs. Even $50 or $100 a month makes a difference over time. Seek out an employer with a group RRSP and take full advantage.

Contribute any tax refunds, bonuses, or inheritance windfalls to your accounts. Automate weekly or monthly contributions.

Use RRSPs to supplement workplace plans

Bridge gaps between jobs with RRSP contributions. Keep building your RRSP while meeting vesting periods for new employer plans when changing jobs.

Withdraw under the HBP or LLP

The Home Buyers’ Plan and Lifelong Learning Plan allow temporary tax-free RRSP withdrawals if used for eligible purposes. Take advantage if needed.

Maximize CPP/OAS benefits

Delay receiving CPP until 70, if possible, to permanently boost payments by 42%. Defer OAS to 65-70 to increase payments by up to 36% if it won’t impact other benefits.

Have a long-term outlook

The power of compounding has worked wonders over decades. Be patient and persistent in contributing to RRSPs and TFSAs. Time is on your side as a newcomer.

Leveraging all available programs, getting an early start, and maintaining consistency gives newcomers the best chance at a comfortable retirement in Canada.

Tips for Newcomers to Maximize Early Retirement Contributions

As a newcomer to Canada, you may feel behind on saving for retirement compared to those who have worked here for decades. However, some proactive strategies can help you kickstart your retirement funds.

Start Contributing to a TFSA Immediately

• Open a TFSA as soon as you get a SIN and social security number, even if you can only contribute small amounts. This builds your contribution room for the future.
• Prioritize regularly depositing even $50 or $100 per month into your TFSA. Automate contributions if possible.
• Invest for growth by holding ETFs, blue-chip stocks or mutual funds within your TFSA. Let your savings benefit from compounding returns.

Make Regular RRSP Contributions

• Contribute any tax refund, bonus or financial windfall into your RRSP to build savings.
• Use an RRSP contribution calculator to determine the maximum you can deposit based on your earned Canadian income.
• Set up automatic monthly RRSP contributions from your paycheck, even if they are modest to start.

Transfer Foreign Pensions

• Investigate transferring any foreign pension entitlements into a Canadian RRSP instead of cashing them out. This preserves their tax-deferred growth.
• Consider the risks and transaction costs involved before transferring pensions.

Choose Workplace Plans Wisely

• When evaluating job offers, give priority to roles with pensions and retirement benefits. Even if they vest later, they provide immense long-term value.

Starting as soon as possible, making consistent contributions, and utilizing all available programs give newcomers the best chance of securing a comfortable retirement in Canada.

The bottom line

Planning for retirement as a newcomer requires understanding how Canada’s system of government benefits, employer pensions and personal savings fit together. Make use of programs like RRSPs and TFSAs to supplement CPP and OAS income. Work closely with a financial advisor to develop a customized retirement plan based on your specific financial situation.

The keys are starting to save early at your age of arrival in Canada, maximizing employer pension plans when available, and diligently building your own retirement nest egg through RRSPs and TFSAs.

While retirement may seem far away as a newcomer, taking these steps today will pay off enormously down the road, ensuring you enjoy your golden years comfortably settled in your new home.

FAQs About Retirement Planning for Newcomers in Canada

Article Sources:

1. Retirement planning as a newcomer in Canada – https://arrivein.com/
2. Saving for Retirement in Canada: What Newcomers Need to Know About RRSPs and TFSAs – https://immigration.ca/
3. Can newcomer Canadians qualify for retirement plans? – https://www.koho.ca/
4. New to Canada and no pension: How to save for your retirement – https://www.moneysense.ca/