A tax-free savings account (TFSA) is a great tool for reaching your savings goals. But are you making the most of yours? Read on to maximize your tax-free savings and avoid these common mistakes.
How to save for retirement in Canada
October 26, 2026
By Sunlife staff
Here’s how to figure out where your next dollar should go.
Key takeaways
- Your employer match and high-interest debt deserve attention first. If your workplace offers to match retirement contributions, that’s extra money you won’t find elsewhere. Paying off credit cards and other high-interest debt offers a guaranteed high return on your money, even though it doesn’t feel like traditional saving.
- An RRSP and TFSA are both solid choices for retirement savings but prioritizing one over the other depends on your tax brackets. Eligible RRSP contributions can generally be deducted from your taxable income now, subject to your available RRSP deduction room, while tax on the growth is generally deferred until you withdraw. TFSAs let you save after-tax dollars that grow completely tax-free. Talk to an advisor to find the strategy that best fits your situation.
- Small, consistent contributions matter more than perfect timing. Setting up automatic transfers on payday, even modest ones, builds momentum over time. Remember you’re not starting from zero. Government benefits like CPP/QPP and OAS, plus any workplace pension will cover part of what you’ll need.
Not sure where to start with saving for retirement in Canada? You’re not alone. It can feel like a lot to figure out at once. You may already be asking yourself:
- Should I save for my retirement in a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA)?
- What if I have debt? Should I prioritize saving for retirement first?
- How much is even enough to retire in Canada?
The good news is you don’t need to solve all of it today. A few simple steps, taken in order, can help cover most of what matters.
Retirement savings and planning is a big picture story, not a series of isolated actions. An advisor can help you build a personalized, comprehensive, retirement plan. They can help you not only factor in your savings goals, but tie them to other aspects of your situation, including your life insurance coverage, will and any estate planning you’ve already done.
“Everyone’s situation is different, so working with an Advisor can give you that personalized advice you need.” says Shannon Tatlock, a Certified Financial Planner and Sunlife advisor. “It’s always important to remember that there is not one plan for everyone and there are so many factors that go into planning for retirement!”
Where should your retirement savings go first?
If your workplace offers to match what you contribute to a retirement account, that’s usually the best place to start. It’s extra money added to something you’re already doing, and it’s rarely available anywhere else.
Learn about: Are you passing up free retirement savings?
After that, most people are better off clearing high-interest debt, like credit cards. While this activity is not specifically about ‘saving for retirement’, it can offer a guaranteed return on your money. Let’s do the math:
If your credit card balance carries a 21% interest rate, paying off that balance is like earning a guaranteed 21% return.
Say you owe $1,000 on that card. Left alone, it costs you about $210 a year in interest. Pay it off, and you keep that $210 instead. It’s the same result as if you’d invested $1,000 and earned a 21% return. Few savings or investments can reliably match that. Clearing high-interest debt first usually leaves you further ahead than investing the same dollars would.
Learn about: Pay off debt or save for retirement: How do you decide?
What about a mortgage? Mortgage rates are usually much lower than credit cards. It’s common to keep contributing to retirement savings even while paying a mortgage off.
Learn about: Save for retirement or pay down your mortgage?
Once you’ve cleared high-interest debt, consider investing whatever retirement savings you can into an RRSP or a TFSA. Both are good places for you to start saving, but the right mix of contributions depends on your personal tax brackets over your lifetime.
Jump to choosing between an RRSP or a TFSA for retirement savings to learn more.
How much should you be saving for retirement in Canada?
There’s no single number that’s right for everyone. You don’t need an exact figure to get started. A common starting point is to aim for about 60 to 70% of your current income in yearly retirement income. Many fixed costs, including saving for retirement itself, go down once you stop working. Feel that’s too much or too little? Consider using a budget calculator to review your current expenses and savings. This helps you identify which expenses will continue into retirement and which may change.
Here’s the part that tends to put people’s minds at ease: you’re not saving that whole amount on your own.
Government benefits usually cover part of your target amount. These include the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP) if you work in Quebec, plus the Old Age Security (OAS). If you have a workplace pension plan, that’ll help cover a portion too.
Try our retirement savings calculator to estimate how much you might need. It factors in an estimate for CPP/QPP and OAS automatically, with the option to add whatever workplace pension you have access to.
Not sure how to put all the pieces together? An advisor can walk through your situation and help you find your retirement savings number.
Choosing an RRSP or a TFSA for retirement savings
Both accounts help your savings grow, just in different ways.
If you expect to be in a lower tax bracket in retirement, an RRSP often makes sense. Contributing gives you a tax deduction now and the money grows tax-deferred until you withdraw it.
If you’re currently in a low tax bracket, or you expect your tax bracket to increase in retirement, a TFSA is a flexible place to start. You pay tax on the money now, but it grows completely tax-free. Plus, you can withdraw it anytime without penalty. That flexibility also makes a TFSA a handy place for an emergency fund. In contrast, pulling money from an RRSP usually means you’ll need to pay income tax.
If you expect your tax bracket to stay roughly the same, both accounts can work well. Some people start by saving in a TFSA, then revisit their tax bracket at year-end to see whether shifting some of that money into an RRSP makes senses. An advisor can help you weigh what fits your own situation.
Many people split their contributions between the two, in a proportion that works for them. There is no one-size-fits-all solution and the allocation can change from year to year. Remember: it’s better to start saving what you can every year rather than wait to have enough to max out your contributions.
When life changes, as it does, your savings plan can change with it. An advisor can help you think it through based on your own situation. They can also flag things to watch for like contribution limits or potential tax consequences, and help you automate your savings.
Getting a late start in retirement savings? Here’s how to think about it
Whatever your age or income, it pays to start now. Even small, steady amounts make a real difference. Setting up an automatic transfer on payday, even a modest one, is one of the simplest ways to make sure you’re saving for retirement.
“Many people haven’t learned about money or received financial education and that is okay.”, reassures Tatlock.
“Some people start saving later in life, some people start saving for a house at 45, some people have kids and only have a little for their education. Do not compare yourself to anyone else’s journey. It’s never too late, your story is YOUR STORY. It’s about making good decisions and moving forward.”
Retirement is getting closer and you’re not sure where you stand? An advisor can help you look at the full savings picture including government benefits, any workplace pension and your own savings. You don’t have to have it all figured out before that conversation.
More resources
Once you have the basics of how to save for retirement, these articles can help you with more specific situations:
- When should you start collecting your CPP/QPP and OAS benefits? You can start collecting your CPP/QPP and OAS benefits in your early 60s. But is it better to hold off a little longer?
- Retiring unexpectedly? Find out how working with an advisor can help you make a smooth transition to retirement – whether you feel ready or not.
- How to increase your RRSP contributions. Are you making the most out of your RRSP contributions? Discover simple strategies to grow your savings more effectively.
Tools
Want a general sense of where you stand? These Sunlife tools can help.
- Sunlife One Plan: Does your employer offer a Sunlife workplace retirement plan? Explore Sunlife One Plan and learn how it can help you build a simple, personalized retirement plan in under 5 minutes.
- Retirement savings calculator: Take 2 minutes to find out how much you will need to save for retirement. Try the retirement savings calculator.
- RRSP calculator: Are you saving enough in your RRSP? Find out in just a couple of minutes. Try the RRSP calculator.
Ready to talk it through?
There is no cost to meet with a Sunlife advisor. Don’t worry about having it all figured out. A Sunlife advisor can help you figure out where to start, at whatever pace works for you.
This information is meant for educational and illustrative purposes only. Some conditions, exclusions and restrictions apply.
