Before you retire, you want to make sure you have plenty of income to cover your spending needs. But, you may want to retire with more than the minimum amount necessary to fund your lifestyle. In fact, many people hope to leave work with more than the ability to cover the bare essentials.

If you’re a few years out from retirement, paying off debt, saving for unexpected healthcare costs and are on track to have an extra $2,700 a month after covering the basics, that’s a pretty good financial position to be in. That $2,700 in extra money would provide you with an additional $32,400 annually to enjoy after paying the bills. That’s almost the total sum of the median income ($34,600) for those aged 65 and over in Canada, according to Statistics Canada.

So, what should you do with this "extra" money if you’re lucky enough to have it? Here are a few possible options to consider.

Donate to charities

Charitable giving is a top priority for many seniors, with 66% of Canadians over the age of 65 committing to donate to charity this year, according to a survey by World Vision Canada.

Giving some of your extra money to causes that you care about can allow you to make a real difference in your later years. A financial advisor can also help you explore tax-efficient strategies for giving, as both provincial and federal governments provide tax credits for charitable donations. For example, if you donate $500 to a charity, the first $200 is eligbile for a 15% credit ($75), while the remaining balance will give you an additional 29% credit ($87), for a total of $162. Check here to see how your specific province’s tax credit.

Invest it on behalf of your kids or grandkids

Investing for your kids or grandkids is another great way to park that extra retirement money, as you can play an active role in helping the next generation get a head start on financial security.

College costs are seeing significant increases. According to Robertson College, the median price for one year in a Canadian university during the 2024-2025 academic year could set a student back $7,360. If you want to spare your grandkids the burden of substantial student loans, you could look into funneling some of your extra money into a Registered Education Savings Plan (RESP).

You could also help out your kids during their expensive child-bearing years when they may struggle to buy a house or pay for daycare costs, where, on average, a parent paid $7,790 per year for the main full-time child care arrangement for their 0- to 5-year-old child in 2022, according to Statistics Canada. However, as of last month, 11 out of the 13 provinces and territories have made agreements with the federal government to extend early learning and child care programs, with an aim of implementing an average of $10-a-day for regulated child care.

Diversify your investments

If you aren’t yet retired and have plenty of money in an RRSP, TFSA or other savings account, you may want to consider putting some funds into a taxable brokerage account.

Diversifying into an investment account can expose a portion of your savings to market gains, furthering bolstering the money you have access to in retirement. If you’re looking to dive into investing but don’t know how or where to start, a trusted robo adivsor, with its legally-mandated fiduciary duty, provide automated financial planning and investments based on algorithms with little or no supervision from you.

Enhance your lifestyle

Typically, common financial wisdom dictates that you shouldn’t succumb to lifestyle inflation (where your spending increases alongside your income). But, while this is prudent advice throughout much of your working years, if you now find yourself in a position to reap the benefits of smart financial moves or simple good luck, you could also use your extra funds to enjoy your life. You can begin by asking yourself what would personally bring you joy? You may decide you want to travel more, spend more time on your hobbies as you aren’t forced to work into your later years or you can let yourself enjoy dining out at nicer restaurants.

Just be sure you don’t go overboard, that you maintain a safe withdrawal rate and an emergency fund for any incidentals or unforeseen healthcare expenses, even if you feel flush with cash for now.

Sources

1. Statistics Canada: Income of individuals by age group, sex and income source, Canada, provinces and selected census metropolitan areas (Apr 26, 2024)

2. Cision: More than Half of Canadians intend to Donate to Charity This Year (Nov 28, 2024)

3. Cision: Provincial and territorial tax and credits for individuals

4. Robertson College: What Is the average tuition In Canada for 2025, by William Borys (Nov 4, 2024)

5. Statistics Canada: Estimates of parental child care expenses in January to February 2022 (Jul 26, 2023)

6. Government of Canada: Toward $10-a-day: Early Learning and Child Care

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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