Most Canadians use a simple calculation to estimate the retirement number. Say the estimated monthly retirement spending is $4,000 or $48,000 a year. Divide that by the 4% withdrawal rate to get a retirement savings number of $1.2 million.
However, you also need to account for several other expenses such as taxes on registered accounts, healthcare costs, and inflation.
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How taxes on RRSP and RRIF withdrawals shrink your retirement income
The balance in your RRSP (Registered Retirement Savings Account) or RRIF (Registered Retirement Income Fund) is not the amount you get to spend.
Every dollar you withdraw from these accounts is taxable by the Canada Revenue Agency. The government also decides when you must start withdrawing money.
For an RRIF, the CRA applies a percentage to your account value at the start of each year. At age 71, that factor is 5.3%. So, on a $100,000 RRIF, the minimum withdrawal is $5,280, and the percentage rises as you age.
If your net income in retirement exceeds a certain threshold, it triggers a clawback of your Old Age Security payout. In 2025, this income threshold was $93,454 and applied to OAS payments disbursed between July 2026 and June 2027.
So, for a retiree with an income of $100,000 in 2025, the clawback will reduce the OAS by almost $1,000.
It’s essential to calculate the retirement after adjusting for taxes and potential clawbacks.
Why inflation can raise your retirement number
Retirement can last for several years, so even modest inflation can compound price hikes over time.
Statistics Canada reported that the Consumer Price Index (CPI) rose 3% year over year in August 2026. Moreover, grocery prices are up 29% since August 2021.
Health care costs Canadian seniors pay out of pocket
Public healthcare plans don’t cover every expense. The Canadian Institute for Health Information (CIHI) reports that seniors make up 19% of the population but account for 47% of health care spending.
CIHI projects that the private sector will cover about 29% of total health spending, which includes private insurance and out-of-pocket costs. Notably, out-of-pocket spending accounts for about 15% of total costs.
CIHI points to prescribed drugs, dental, vision, and home care as areas where private spending is growing.
Long-term care costs in Ontario and what to budget
Even in a publicly supported long-term care home, residents pay for accommodation and meals.
In Ontario, the maximum basic co-payment rose to $70.00 a day on July 1, 2026, or $25,550 a year.
Rates and rules differ by province, while lower-income residents may qualify for a reduction. Check your province’s schedule, but make sure you account for care budgets in retirement.
How rising dividend income from Fortis can ease portfolio withdrawals
Once you calculate your final retirement number, put your savings to work to beat inflation over time while generating a passive income stream.
One Canadian dividend stock to add to your retirement portfolio watchlist is Fortis (TSX: FTS), a regulated utility that has raised its payout for 52 consecutive years, according to its second-quarter 2026 results.
In Q2, it paid a quarterly dividend of $0.64 per share, up 4.1% year over year, above the 3% inflation rate. Today, it offers a dividend yield of over 3.4%, which is attractive to income-seeking retirees.
Management says the dividend growth should continue. Fortis CEO David Hutchens told investors on the July 31 earnings call:
“Looking ahead, we remain confident in our 4% to 6% annual dividend growth guidance through 2030, supported by our regulated growth strategy.” Identify other such quality dividend stocks and own them in a TFSA (Tax-Free Savings Account) to create a tax-free income stream.
The Foolish takeaway
Work through your retirement number again with three changes.
Calculate your after-tax income, account for inflation, and add a separate line for healthcare. Then test it against a tougher scenario, such as higher inflation, weaker investment returns, or a longer retirement.
