{"id":499944,"date":"2026-05-24T03:33:14","date_gmt":"2026-05-24T03:33:14","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/499944\/"},"modified":"2026-05-24T03:33:14","modified_gmt":"2026-05-24T03:33:14","slug":"5-retirement-mistakes-canadians-make-in-the-planning-stages-they-cant-undo-later-and-how-to-avoid-them","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/499944\/","title":{"rendered":"5 retirement mistakes Canadians make in the planning stages they can\u2019t undo later \u2014 and how to avoid them"},"content":{"rendered":"\n

Want to know whether you\u2019re prepared for retirement? According to Frederick Vettese, the now-retired former chief actuary of Morneau Shepell (now Telus Health), it\u2019s the first five years that establish the outcome.<\/p>\n

In a recent column for the Globe and Mail (1), Vettese \u2014 a well-respected thought leader on retirement issues \u2014 highlights how the first five years of retirement can set the course for comfortable and fulfilling sunset years \u2014 or lock you into a financial position that has you feeling trapped.<\/p>\n

Don’t Miss <\/p>\n

As Vettese explains, the average length of retirement in Canada is roughly 20.5 years \u2014 and the potential to make mistakes is high. But the author of four books on retirement planning, most notably the best seller, Retirement Income for Life, isn\u2019t discouraged. He believes that with some foresight and the right planning, every Canadian retiree can dramatically reduce the risk of going off-course and end up truly living out their golden years.<\/p>\n

To help, here are the crucial mistakes to watch for \u2014 and avoid.<\/p>\n

Mistake #1: Claiming CPP and OAS at the wrong time <\/p>\n

The timing of your Canada Pension Plan (CPP) and Old Age Security (OAS) claims is the most crucial financial decision you’ll ever make \u2014 and you only get one shot to get it right.<\/p>\n

CPP can be taken as early as age 60, but claiming before the standard age of 65 reduces your monthly payment by 0.6% for every month you collect early \u2014 up to a maximum reduction of 36% if you start at 60 (2). On the other hand, delaying CPP beyond 65 boosts your benefit by 0.7% for each month you wait, to a maximum increase of 42% at age 70 (2).<\/p>\n

OAS is available from age 65 (with some exceptions for those born before 1958). Like CPP, deferring OAS past 65 \u2014 up to age 70 \u2014 increases your monthly payment by 0.6% for each month of delay, for a maximum boost of 36% (3).<\/p>\n

In both cases, you only get one shot at this decision. Before making it official, weigh your household budget, your health, your life expectancy and the rest of your income plan carefully before locking in a start date.<\/p>\n

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Mistake #2: Poor tax planning in early retirement <\/p>\n

The first five years of retirement can be a golden window for tax planning \u2014 especially if you retire before converting your Registered Retirement Savings Plan<\/a> (RRSP) to a Registered Retirement Income Fund<\/a> (RRIF), which must happen by December 31 of the year you turn 71 (4).<\/p>\n

If your income drops significantly in the early years of retirement, you may find yourself in a lower tax bracket. The window between retirement and age 71 is a smart time to make strategic RRSP withdrawals \u2014 before you’re required to convert to a RRIF and take mandatory minimums. By drawing down on your registered savings while you’re in a lower tax bracket and moving the after-tax proceeds into a Tax-Free Savings Account<\/a> (TFSA), you can reduce what you’ll owe over your lifetime and soften the tax hit of future RRIF withdrawals (5).<\/p>\n

Ignoring this window \u2014 or failing to plan ahead for your taxes in early retirement \u2014 can create ripple effects that significantly increase your taxes later, when RRIF minimums are larger and your income may be higher.<\/p>\n

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Mistake #3: Squandering your healthiest years <\/p>\n

There’s a reasonable chance the first years of your retirement will also be your most physically capable.<\/p>\n

Statistics Canada reports the average Canadian’s health-adjusted life expectancy at birth is approximately 66.9 years as of 2023 (6). That means if you retire at 65, you may potentially have a short time of peak-health years ahead. If you’ve dreamed of hiking the Inca Trail, cycling across Europe or finally tackling that bucket list, the case is strong for pursuing those experiences in your early 60s rather than waiting for your 70s or 80s.<\/p>\n

In other words: Don’t delay the activities that demand the most physical ability.<\/p>\n

Mistake #4: Not planning for medical costs and long-term care <\/p>\n

Canada’s public healthcare system covers many medical expenses \u2014 but it doesn’t cover everything, and long-term care (LTC) is one service that’s largely overlooked.<\/p>\n

Provincial long-term care programs are means-tested, and look widely different depending on where you live \u2014 and most require residents to contribute to the cost of their care, around 22% (7). In Ontario, for example, a long-term care home can run between $25,000 to around $36,000 a year, and the wait list for a publicly funded bed can stretch on for years (8).<\/p>\n

Many Canadians assume provincial programs will pay most of their future care costs, but the reality is that personal savings, home equity and private LTC insurance are often necessary to cover costs. A 2023 survey by the Canadian Life and Health Insurance Association (CLHIA) found that less than 1% of Canadians have a long-term care plan in place for covering long-term care expenses (9).<\/p>\n

A wiser approach is to build a realistic plan for medical and long-term care needs in your 50s and early 60s \u2014 ideally with the guidance of a qualified financial adviser.<\/p>\n

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Mistake #5: Neglecting sequence-of-returns risk <\/p>\n

Markets regularly move up and down, and that’s nothing new. But a downturn in the early years of retirement is a different kind of problem. It can cause long-lasting damage to your portfolio in a way that a dip during your working years doesn’t.<\/p>\n

It’s what’s known as a sequence-of-returns risk. When you’re drawing income from your portfolio, a big loss early on means you have to sell more of your investments just to keep the same level of income \u2014 and that permanently reduces the base you have left to recover when markets eventually bounce back.<\/p>\n

One widely recommended approach is to create separate “buckets” for different phases of retirement (10). For example, keeping one to two years of living expenses in cash or low-risk assets means you can cover daily expenses without selling equities at a loss during a market downturn \u2014 giving the rest of your portfolio time to recover.<\/p>\n

Financial Planning Standards Council (FP Canada) and many registered financial planners recommend building this kind of layered income strategy well before your last day of work \u2014 not after.<\/p>\n

Canadian next steps: How to put this into practice <\/p>\n