There are some key ways that expenses typically decline in retirement, which can help to reduce the amount of income you need to maintain your desired lifestyle.
- Payroll deductions, such as contributions to Employment Insurance (EI), Canada Pension Plan (CPP) and union dues end when employment ends. CPP and Old Age Security (OAS) then become net benefits, although both are taxable, and OAS is subject to a clawback above incomes of approximately $75,000.
- Pre-retirement budgets often include mortgage payments that come to an end, either through making the final monthly payment, or through a downsizing that pays off the mortgage.
- The financial cost of children generally subsides as they become adults (though not in all cases).
The money you save from these reduced expenses, combined with the various tax breaks that kick in over age 65, can afford you a more comfortable retirement.