The retirement question most people ask backwards

 There is one question I hear all the time, and every time I hear it, it makes me slightly shudder. Not because it is a bad question, but because the people asking it are usually looking for the wrong kind of answer.

The question is: "How much money is enough to retire?"

It sounds reasonable. It sounds responsible. But most people don’t realize that the answer they’re hoping for, a single, magic number, isn’t actually very helpful. It creates anxiety. It invites guesswork. And it treats your retirement savings like a finish line, rather than what they really are: an engine.

A better question is this: What does your retirement income look like in layers, and which of those layers do you need to fund from your own savings?

I think we all intuitively understand the idea of layers. Your retirement income isn’t one big pile of money; it is a stack of building blocks. Let’s look at them from the ground up:

• Layer 1: Government Programs. This includes the Canada Pension Plan (CPP) and Old Age Security (OAS). These are your foundation, income that arrives whether you save a dime or not.
• Layer 2: Workplace Pensions. For some, this includes company-sponsored pension plans (defined benefit or defined contribution).
• Layer 3: Registered Savings. This layer includes your Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).
• Layer 4: Personal Savings & Assets. This is the money you have saved outside of registered accounts, plus assets like a paid-off home that could be downsized to free up funds.

When you see retirement this way, the question shifts. You stop asking, "How big does my single pile of savings need to be?", blindly hoping you’ll like the answer, and instead you ask, "How much income do I need each year, and which layers are going to provide it?"

Most of us will have a mix of income sources in retirement. The common mistake is looking at each layer in isolation, rather than seeing how they stack together to form your total retirement income.

Let’s look at how the math works for a typical Canadian.

The Government Foundation (Layers 1 & 2)
For most retirees, the first layer, CPP and OAS, will provide a base of income. Here is the current breakdown:

• Canada Pension Plan (CPP): The CPP is designed to replace about 25% of your average lifetime earnings, up to a maximum limit. It is based on what you contributed during your working years, not your final salary.
• Old Age Security (OAS): OAS is a monthly payment available to most Canadians 65 and older, regardless of work history (though it is subject to a claw back at higher income levels).

When you combine these two government programs, they typically replace between 30% and 40% of your pre-retirement income for the average earner.

Financial experts often suggest that to maintain a similar lifestyle in retirement, you should aim to replace about 70% of your working income. Some years you might need more; some years less. But 70% is a solid target.

If the government layers are providing 30–40%, that leaves a gap of roughly 30–40% of your working income that needs to come from your own savings, workplace pensions, or other assets.

That gap is where the magic happens.

This is where the concept of growth becomes critical, and why reviewing your savings early matters so much.

Money you save doesn't just sit there. It grows. Through the power of compound growth, your savings earn returns, and those returns earn returns of their own. Over time, this effect turns small, regular contributions into substantial income streams.

Consider this: If you have $100,000 saved at age 55 and you leave it invested earning a modest average annual return of 5%, by the time you turn 65, that money could grow to nearly $163,000, without you adding another penny. That is the magic of compounding.

But compounding needs time to work. The sooner you review your savings; the more time you give your money to multiply. Waiting until the year you retire means you lose those precious years of growth.

For many people approaching retirement, there is another layer worth considering: part-time work. I worked part-time for the first 15 years of my retirement, and then I stopped.

Work does not need to be full-time, and not forever. But even a small amount of income in the early years of retirement can make a massive difference to your long-term security. I  worked part-time for fifteen years and earned a lot of money. This was money I did not to withdraw from my savings. My investments stay intact. They kept compounding. They kept growing.

By the time I stopped working entirely, that money had several extra years (15) to grow, giving me a larger cushion for the years when you need it most. I worked for a number of reasons, one of which is I did not start saving for retirement until I was 50 years old.

So, let's bring it all together. The question you should be asking isn't, "How much do I need to save?"

It's this: "How much income will I have from CPP, OAS, and any workplace pensions, and how much of the gap do I need my savings to fill?"

Once you know that gap, you can look at your savings and ask the next logical question: "Based on what I have saved today, and assuming it continues to grow over the next 5, 10, or 20 years, how much income will it generate?"

That is a question you can answer. That is a plan you can build.

If you are approaching retirement, I urge you: do not wait to have this conversation with yourself.

It is easy to avoid the numbers because they feel overwhelming. It is easy to tell yourself you will look at it next year. But every year you wait is a year of compound growth you leave on the table.

You don't need to have all the answers today. You just need to start asking the right questions. Look at your layers. Understand your gap. And give your savings the time they need to grow into the retirement income you deserve.

The chaos around us may be loud, but your financial future doesn't have to be chaotic. It just needs a plan. And the best time to start that plan was twenty years ago. The second-best time is today.