If you plan on retiring and rely primarily on the Canada Pension Plan (CPP) you may have heard you will end up being perpetually cash-strapped. So, does that mean you should stay at your job? Learn to survive on noodles? Or work more to build up savings?
To help you decide, you first need to understand how your CPP is calculated and what you can expect in your retirement years.
As of January 2025, the maximum monthly amount you can get, if you started collecting CPP at age 65 is $1,433.00. Doesn’t sound like a lot, but it gets worse. Turns out most Canadians don’t even get the maximum amount of monthly CPP income. For instance, in October 2024, the average monthly CPP payment to anyone aged 65 and just starting their retirement payments was $808.14.
Living on less than $1,000 — put another way, living on CPP alone — is no easy feat, especially when inflation continues to drive living costs upward.
And yet so many Canadians rely on CPP as their primary income source in retirement. According to an Ontario Securities Commision survey, 85% of Canadians rely on the federal Canada Pension Plan (CPP) as the vital foundation for their retirement income. Additionally, a 2024 Healthcare of Ontario Pension Plan survey found that almost half (49%) of unretired adults have saved nothing for retirement in the last year, while all Canadians continue to worry about having enough money in retirement (58%).
For those young enough, this should be a wake up call: To start saving for the non-earning years.
For others, it’s a reminder: It’s possible to live on CPP, along, but to make it work, you’ll need to make some sacrifices. To help, here are three suggestions.
Delay your CPP claim for a larger monthly benefit
You can sign up for CPP once you reach age 60, but delaying it for a few years — say until age 65 — allows you to collect your full-CPP monthly benefit (rather than a reduced rate, based on the extra years you are collecting the income). By delaying your CPP claim until age 65, you get your complete monthly benefit based on your individual earnings history.
You also get credits for delaying your CPP claim — a credit for each year past age 60 that you delay. This translates into an 8.4% increase in your monthly benefit, per year, up to a maximum of 42% if you wait to collect CPP at age 70.
By delaying CPP payments, continuing to work and finding smart cost-saving strategies, you could end up in a position where the CPP benefit you collect starting at age 70 is sufficient to live on, without additional savings.
If you can’t wait until 70, try to hold off until 65 to avoid a significant reduction to your monthly benefit.
Scale back your living costs and stick to a tight budget
Only a third of Canadians (33%) currently have a financial plan and 59% do not have a household budget for the year.
If your retirement plan is to live on CPP alone, you must be prepared to budget carefully and limit your spending on non-essential items. That could mean doing most or all of your cooking at home instead of dining out, and limiting yourself to free hobbies such as hiking or community events.
That said, staying busy without spending money by spending time with like-minded people is possible. With the right company, you can enjoy hiking, gardening or discussing your latest library finds over coffee rather than doing activities that force you to open your wallet.
Reduce your housing costs by downsizing
Housing costs account for about 30% of expenses among Canadians across all provinces, according to Advanis.
If you’re forced to rely solely on CPP during retirement, you may need to take steps to reduce your housing costs, and downsizing could be a great solution.
Downsizing could do more than just save you money (as it should allow you the option to pay less rent or reduce those mortgage payments). If you’re a homeowner, downsizing could mean cheaper property taxes and lower maintenance expenses. It also typically costs less to heat and cool a smaller home than a larger one, so there could be some significant savings there, too.
Sources
1. Government of Canada: CPP Retirement pension: How much you could receive
2. Ontario Securities Commission: Profiles of Retirement (Jan 10, 2024)
3. Healthcare of Ontario Pension Plan: New research from HOOPP and Abacus Data finds half of Canadian women have less than $5,000 in savings; most Canadians feel unprepared for retirement (Jun 20, 2024)
4. BMO: One-third of Canadians expect to curtail their spending in 2025 (Dec 17, 2024)
5. Advanis: Housing affordability across Canada (Jun 26, 2024)
This article I’m 65, tired of working and have very little savings — is it possible to live off CPP alone? Yes, but you’ll need to make these 3 big sacrifices originally appeared on Money.ca
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
