retirement planning

The 4 Budgets of Retirement: How to Spend Confidently at Every Stage

Most Canadians understand the importance of having a budget while saving for retirement—but few realize just how critical budgeting becomes after you retire.

While your working years are about maximizing savings and staying invested, retirement introduces a new challenge: spending wisely without outliving your money.

One of the most common questions from retirees is:
“How do I protect my portfolio against a market correction?”

While you can’t control the markets, you can control how much you withdraw and when. And that starts with a retirement budget tailored to each phase of your journey.

The Four Phases of Retirement

Just like your working life has seasons, so does your retirement. These four stages—Before You Go, Go-Go, Slow-Go, and No-Go—help define your spending needs and investment strategy over time.

Planning with these stages in mind enables you to build an agile retirement budget that grows, flexes, and contracts as needed—while keeping your long-term financial health intact.

1. Before you Go: The Accumulation Years

This is the “pre-retirement” phase, which often lasts longer than retirement itself. It’s the period when you’re actively saving, investing, and preparing for what lies ahead.

The most important principle here?
Pay yourself first. Systematic investing—through your RRSP, TFSA, or pension—is the cornerstone of a secure retirement.

But don’t stop there. This is also the time to envision the kind of retirement you want:

Will you travel regularly?
Do you want to help your children financially?
Will you buy a vacation home or downsize?

These answers will shape your savings targets and retirement age. The earlier you plan, the more flexibility you’ll have later.

Tips for this phase:

Use tools like a Projection Spreadsheet to explore different scenarios.
Adjust contributions between RRSPs, TFSAs, and other accounts based on your income and pension entitlements.
Stick with a consistent investing strategy that suits your goals and risk tolerance.

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Canadian Retirees Guide to Income-Producing Investments Cover.

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While there is no free lunch in finance, there are multiple ways to reach your retirement goals.

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2. Go-Go Years: The Fun Phase

The moment you retire, you enter the “Go-Go” phase. You’ve worked hard, saved diligently—and now it’s time to enjoy the rewards. For many Canadians, this phase lasts from their early 60s to around age 75.

Picture of a retired couple walking on the beach.

This is when you’ll likely:

Travel more
Make larger discretionary purchases
Renovate your home or relocate
Spend on family or hobbies

However, this phase also presents a new challenge: shifting from saving to spending. Many retirees feel anxious about drawing down their portfolio.

That’s why having a flexible budget is key. You’ll want:

A base budget for regular expenses (housing, food, utilities)
A variable budget for travel, new cars, and other big-ticket items

Tips for the Go-Go years:

Reassess your plan annually: simulate “retiring now” each year to update your 12-month budget based on portfolio performance.
Postpone large purchases in down markets and increase spending during up years.
Use advanced budget tools to account for one-time gifts or lifestyle upgrades.

3. Slow-Go Years: Steady as It Goes

As you move into your mid-to-late 70s, travel slows down, energy levels shift, and your budget changes again.

While you’ll spend less on big adventures, your base expenses may stay the same—and some costs (like health care or home maintenance) could increase.

You might also want to adapt your home for aging-in-place or plan for more frequent medical appointments or services.

Tips for the Slow-Go phase:

Don’t reduce your budget too aggressively; changes should be gradual.
Consider future-proofing your home for mobility and comfort.
Explore downsizing or selling assets to unlock cash if needed.

4. No-Go Years: Health First, Finances Second

This final phase typically begins in your 80s or later, when cognitive or physical health changes become more significant. You may spend more time at home, require assisted living, or home care.

At this point, your budget shifts to reflect increasing healthcare needs, estate planning, and support services. You’ll have a reliable income stream if you’ve built a strong foundation with defined benefit pensions, CPP, OAS, or annuities.

If your strategy included gradually drawing down your portfolio or even “dying with zero,” this is the time to ensure you’ve preserved enough flexibility.

Tips for the No-Go phase:

Be cautious with plans to spend aggressively in earlier phases; longevity risk is real.
Keep a home as a backup asset, or ensure stable income from guaranteed sources.
Review estate plans and consider early inheritance options or charitable giving if desired.

Final Thoughts: Plan Long, Adjust Yearly

Planning for retirement is much like planning a long road trip. You need a map for the big picture, but you’ll also need to reassess regularly, adjusting for weather, detours, and unexpected stops along the way.

One of the best habits you can develop is to “retire each year.” That means checking in annually with your budget, income, and lifestyle expectations. That way, you’re not just reacting to market corrections—you’re steering your retirement journey with confidence.

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Puzzled about Old Age Security (OAS)?

How is Old Age Security (OAS) different from the Canada Pension Plan (CPP)? Who is eligible for OAS and what is the benefit amount? How does one apply for OAS benefits? What is this OAS claw back you’ve been hearing about? So many questions, so little time. Look no further, here are the answers, in a nutshell.

What is Old Age Security (OAS)?

Old Age Security (OAS) is a taxable monthly payment the federal government gives Canadian residents and/or citizens who meet the eligibility criteria, once they are 65 years old or older.

How is OAS different from the Canada Pension Plan (CPP)?

Unlike the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP/RRQ), the OAS is not a pension to which you and your employer(s) contribute over the years. OAS payments come from the taxes the federal government collects each year.

Another key difference is that OAS payments are not based on how long people have worked or how much money they earned. OAS benefits are paid to every eligible citizen or legal resident, even if they never received employment income.

Want to know more about the CPP/QPP? See Explaining the Canada Pension Plan (CPP).

Who is eligible to receive OAS?

You are eligible to receive OAS payments if:

You are a Canadian citizen or legal resident.
You are 65 years of age or older.
You currently live in Canada and have resided in Canada for at least 10 years since the age of 18, or you don’t currently live in Canada but have done so for at least 20 years since the age of 18.

There are rules for other situations; for example, if you lived outside Canada while working for Canadian employers, or if you have contributed to other countries’ social security programs.

How much will I receive in OAS payments?

The amount of the OAS payment depends on how long you have lived in Canada since the age of 18, and the age when you start receiving the payment. Your OAS monthly payment increases by 10% when you turn 75 years old.

The amount of the OAS benefit is reviewed and updated four times a year to adjust it for the cost of living.

Surely there is a maximum OAS payment…

Right you are! As of June 2023, the maximum OAS payment is $691 per month ($760.10 per month for people 75 and older).

The maximum payment is paid to people who lived 40 years in Canada after the age of 18, and who have a net income that is below a specific threshold for the calendar year prior to the payment. More about that later.

Find out how to get an estimate of your OAS benefits, download our guide now.

How do I apply for OAS?

Most eligible Canadians do not have to apply to start receiving OAS payments; when you get close to the age of 65, you’ll receive a letter from the government indicating when you will start to receive OAS payments. However, if you decide to delay receiving your payments, you must notify the government.

Delay the start OAS payments! Whatever for?

You can delay receiving OAS payments until the age of 70. For every month after your 65^th birthday that you delay receiving your first OAS payment, the government increases the amount you will receive by 0.6%, or 7.2% per year.

Once you start receiving OAS payments, you cannot change your mind; in other words, you cannot pause the payments to delay to a later age and receive a higher payment.

What is the OAS claw back?

The purpose of the OAS is to provide some financial protection and reduce poverty in old age. OAS recipients who have enough income from other sources to live comfortably must pay back some or all of the OAS payments they receive. This is often called the OAS claw back; the government calls it a recovery tax.

What is the income level at which
I have to pay back some of my OAS?

As of July 1^st, 2023, if your net income is below $81,761, you do not have to pay back any of the OAS benefits you receive in 2024. For incomes above that threshold, the amount to pay back is 15% of the difference between your net income and $81,761. The income threshold is updated yearly.

What is considered income for the OAS claw back?

Income includes work income, pensions, CPP payments, withdrawals from RRSPs, and dividends, capital gains, and interest earned from non-registered investments.

Download our guide to get tips for choosing when to start receiving OAS payments, and more information.

What do I need to do about OAS?

Decide at what age you want to start receiving OAS payments.
Before you turn 65, you will receive a letter from the government letting you know when to expect your OAS benefits, and the amount you will receive.
- If you want to start receiving OAS at 65, and all the information in the letter is correct, you don’t have to do anything. If there are errors in the letter, you will have to contact the government.
- If you want to delay the start of the OAS payment, you will have to notify the government before you turn 65.

Why does the Government of Canada pay OAS benefits?

Side by side headshots of James S. Woodsworth and Abraham A. Heaps — L to R: James S. Woodsworth and Abraham A. Heaps

We can thank two labour party MPs, James S. Woodsworth and Abraham A. Heaps, both from Winnipeg. In 1925, they accepted to support prime minister Mackenzie King’s minority government in exchange for his promise to, among other things, create old age benefits.

At the time, many seniors were living in poverty. The jobs they had relied on to earn a living were disappearing as industrialization profoundly changed how goods were produced. Younger workers who were supporting their aging parents struggled to save money for their own old age.

Although Mackenzie King resigned before creating the old age benefit, he was re-elected in 1926, this time with a majority. He kept his word. The Old Age Pensions Act came into effect in 1927.

Retirement Cash Reserve: Surf the Market’s Waves

Having a cash reserve on-hand makes it easier to transition from your investment accumulation years to your retirement years and protects your portfolio during times of volatility.

Throughout your retirement, you’ll go through bull and bear markets. During a bear market, selling shares to generate your homemade dividend could hurt your retirement plan.

That’s when the cash reserve helps; it’s money that is not invested in the stock market anymore. It must be secure and easily accessible.

How to use the cash reserve

Your cash reserve bridges the gap between what your portfolio generates in dividends and your retirement budget; it prevents having to sell shares when it is not advantageous to do so.

If you need $50,000 per year and your portfolio generates $40,000, the gap is $10,000 per year.

The $10,000 gap could be filled by selling shares. Selling shares at a depreciated value could hurt your retirement, whereas dipping into a cash reserve keeps your portfolio intact. When the market recovers, you can sell additional shares to refill your cash reserve.

How much cash reserve is enough?

There’s no clear answer to this question. You want to mitigate the impact of market volatility on your withdrawal sequence, but you also want to maximize your portfolio returns.

A large cash reserve increases the short-term protection of your withdrawals but amputates your portfolio’s ability to generate higher returns on the market over the long haul.

Therefore, the amount of the cash reserve depends on the gap to fill and your tolerance to volatility. Some investors are comfortable without any cash reserve; they simply accept that they will sell shares yearly to complete their retirement budget, regardless of how the market is doing.

Others prefer a large cash reserve to cover all potential catastrophes. While most bear markets take around 24 months to recover, some have taken more than four years to fully recover.

Get some great stock ideas to build your portfolio and cash reserve with our Rock Stars List

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Create a cash reserve

To create a cash reserve, you can stop reinvesting your dividends a few years before retiring and let the cash build up in your account. It’s on autopilot, simple, but it could take a few years to reach the required amount; during that time, the cash doesn’t generate any meaningful returns.

To let your portfolio work at full speed until the very last moment, you could sell one- or two-years’ worth of your financial needs in shares on day 1 of your retirement. However, if you retire at the bottom of the market, you’d be selling at a very bad time.

Cash reserve example

Imagine you have a $1M portfolio, an average dividend yield of 3.5%, and a retirement budget of $50,000/year. Since the portfolio generates $35,000 in dividends ($1M X 3.5%), the gap between what you generate and what you need is $15,000.

To ensure you don’t have to sell shares during a bad year, you decide to create a cash reserve of four years’ worth of the $15,000 gap, so $60,000.

Create and manage the cash reserve

In this example, a few years before start of your retirement, you stop reinvesting your dividends to let them accumulate. A year before your retirement date, you have your $60,000 cash reserve on hand.

You manage your cash reserve through a three-year ladder of Guaranteed Investment Certificates (GICs), Certificates of Deposit (CD), and/or bonds that would look something like this:

$20,000 for 1 year at 3%
$20,000 for 2 years at 3.25%
$20,000 for 3 years at 3.30%

You also keep accumulating your dividends in cash rather than reinvesting them.

At the end of the year, you retire

As you retire, your 1-year GIC/CD is worth $20,000 + $600 (one year of interest). Since you stopped reinvesting your dividends 12 months ago, you’ve also accumulated $35,000 in dividends ($1M X 3.5%).

Income on hand for year 1 of retirement

GIC/CD with interest	$20,600
Dividends	+ $35,000
Total	$55,600
Budget	($50,000)
Difference	+ $5,600

You reinvest that extra $5,600 for another 3 years to feed the ladder and keep it going.

If it’s a good year and your portfolio is up, you sell shares to have just enough money to “refill” your bond ladder. Then you have another $20K to invest for 3 years. With the extra $5,600 on hand, you only have to sell $14,400 of shares to reach $20K and complete the ladder.

Notice that $14.4K on $1M equals a 1.44% capital gain. On most years, you’ll be able to do that easily without chipping away at your capital.

What if the market is bad?

If it’s not a good year and your portfolio is down, you can easily wait 6 months or a year and see where the market is at that time before selling shares. Really? Yes, because you already have your income for the year and, at the end of year 1, you’ll have this on hand for year 2 of retirement:

2-year GIC/CD with 3.25% interest	$21,321
One year of dividends*	+ $35,000
Total	$56,321
Budget	($50,000)
Difference	+ $6,321

* This is the same amount as the previous year; by investing in dividend growers, it is likely that some of your holdings increased their dividends, so this could be higher.

If at the end of year 2 of retirement the market is still bad, you still have your 3-year GIC/CD worth $22,046, and another 12 months of dividends from your portfolio.

Of course, waiting to sell shares during a bad spell in the market means that eventually you’ll have to sell more to refill your cash reserve ladder.

Considering that most crashes happen over a few months or a year, after which the market starts recovering, and that the cash reserve ladder ensures you have over two years of buffer, you’ll be in a good position to refill the ladder using only or mostly your capital gains and dividend increases, thus securing your retirement for year to come!