Retire Early in Canada With $2.75M? Do the Math

A $2.75 million retirement portfolio sounds like a slam dunk—until you convert it into monthly income, add inflation, and realize the government benefits you counted on can shrink fast if your taxable income spikes.

That’s the real issue for many Halifax empty nesters staring at a big RRSP, healthy TFSAs, and a paid-off (or nearly paid-off) home: it’s not just “Can we retire early?” It’s “Can we retire early without tripping CPP/OAS timing mistakes, OAS clawback surprises, or a bad-sequence market year?”

This post is part of our Interest Rates, Banking & Personal Finance series, so we’ll also talk plainly about the 2025 backdrop: rates are still a meaningful force. When safe yields are decent, it changes how you build retirement income—but it doesn’t eliminate the need for careful tax planning.

Is $2.75M enough to retire early? A realistic income range

Answer first: For most Canadian couples, $2.75M is enough to retire early—but only if your spending, taxes, and withdrawal strategy line up. The portfolio size matters less than how efficiently you turn it into after-tax income for 30–40 years.

A practical starting point is a conservative withdrawal range:

• 3% of $2.75M = $82,500/year
• 3.5% of $2.75M = $96,250/year
• 4% of $2.75M = $110,000/year

Those numbers are gross withdrawals before tax, and they assume you’re invested in a balanced way and willing to adjust spending in down markets.

Why early retirement needs a lower “safe” withdrawal rate

If you’re retiring at 55–60 instead of 65+, you’re funding more years. That increases the odds you’ll face a rough early market period (the classic sequence-of-returns risk).

My stance: start closer to 3%–3.5% if you’re retiring before 60—especially if a large chunk is in RRSPs/RRIFs (taxable on withdrawal) and you don’t have a strong pension smoothing things out.

Quick case study: the Halifax empty nester profile

Let’s assume:

• Couple, mid-to-late 50s
• Portfolio: $2.75M split across RRSPs, TFSAs, and non-registered
• Goal: retire now, spend well, avoid nasty surprises

A very workable target might be $90,000–$105,000/year after tax depending on lifestyle and housing costs. But getting there cleanly depends on where the money sits and how you draw it.

The clawback trap: OAS isn’t “free money” if your income runs hot

Answer first: OAS clawback (recovery tax) is triggered by high net income, not by how large your portfolio is. Poor withdrawal planning—especially large RRSP/RRIF withdrawals—can make OAS smaller or disappear.

OAS is sensitive to your net income for tax purposes. If you overshoot the threshold, you pay back some OAS through the recovery tax.

Here’s the part many early retirees miss: OAS clawback is often self-inflicted. It’s commonly caused by:

• Big RRSP/RRIF withdrawals (especially after 71 when RRIF minimums begin)
• Large capital gains realized in a single year
• Taking CPP + OAS while also generating high taxable investment income
• Selling a property or business that creates a taxable gain

A “smooth income” plan usually beats a “wait and see” plan

If your RRSP is large, you’re sitting on a future tax bill. The question is when you want to pay it.

A lot of couples accidentally do this:

1. Retire at 58
2. Live mostly off non-registered savings and TFSAs (low tax)
3. Delay RRSP withdrawals to “later”
4. Hit their 70s with a huge RRIF and forced withdrawals
5. Create high taxable income right when OAS begins (or is already running)

That’s when clawback risk jumps.

Snippet-worthy reality: OAS clawback isn’t a retirement “penalty.” It’s a tax-planning problem you can often prevent.

CPP and OAS timing: the best move depends on what you’re solving for

Answer first: The “right” CPP and OAS start age is the one that supports your plan for (1) longevity risk, (2) tax efficiency, and (3) market risk. Early retirement changes the math because you may have years of low taxable income to use wisely.

CPP: take it early, on time, or late?

CPP can start as early as 60 or as late as 70 (higher payments if you delay). Here’s a simple way to think about it:

• Delay CPP if you want higher guaranteed lifetime income and you can fund the gap from your portfolio.
• Take CPP earlier if cash flow is tight, health is poor, or you need to reduce withdrawals from volatile investments during a downturn.

My opinion: Many high-asset early retirees benefit from delaying CPP, because it’s an inflation-adjusted, government-backed income stream. It acts like longevity insurance.

OAS: delaying can be smart—but only if it helps your tax picture

OAS can also be delayed (higher payments later). Delaying can work well if:

• You’re doing planned RRSP drawdowns in your 60–70 window
• You want to keep taxable income lower when OAS starts
• You’re trying to avoid or reduce future clawback exposure

But if you’re already confident you’ll be under clawback thresholds and you value earlier guaranteed income, taking OAS sooner may be reasonable.

The underrated move: use the “gap years” for RRSP/RRIF planning

Those early retirement years—before CPP and OAS kick in—are often your lowest-income years.

That’s prime time to:

• Withdraw from RRSPs at a controlled rate
• Potentially convert some RRSP to RRIF early (for structured withdrawals)
• Top up taxable income to a target bracket (instead of huge withdrawals later)

The goal is simple: pay tax on your terms, not when forced withdrawals are largest.

Interest rates in 2025: why they matter for retirement income planning

Answer first: Higher yields can support retirement cash flow, but they also change risk trade-offs. Rates affect (1) how much income safer assets generate, and (2) the temptation to park everything in GICs or cash.

With interest rates still an active topic in Canada, retirees are asking a fair question: If GICs pay “decent” again, can I retire with less risk?

Yes—but don’t over-correct.

What higher rates help with

• Better income from safer options: GIC ladders and high-interest savings accounts can produce more yield than in the ultra-low-rate years.
• Cash wedge strategy becomes more viable: Keeping 1–3 years of planned spending in cash/GICs can reduce the need to sell equities after a market drop.

What higher rates don’t solve

• Inflation still compounds: Even if inflation cools, 2%–3% for 25 years is enormous.
• Taxes don’t go away: Interest income in non-registered accounts is fully taxable and can push income toward clawback territory.
• Longevity risk is real: A 55-year-old couple could be funding 35–40 years.

Practical stance: Use higher rates to stabilize the first decade of retirement, not to abandon growth entirely. A balanced approach usually ages better.

A simple withdrawal order that often reduces taxes (and clawbacks)

Answer first: A coordinated withdrawal strategy across RRSP, TFSA, and non-registered accounts can lower lifetime taxes and reduce OAS clawback risk.

There’s no universal order, but here’s a framework that’s often effective for early retirees with a large RRSP:

1) Spend from non-registered strategically

Non-registered accounts give flexibility:

• You can realize capital gains gradually
• You can harvest losses in bad years
• You can manage taxable income more precisely

But remember: interest income here is tax-heavy and can inflate net income.

2) Use RRSP withdrawals earlier than you think (controlled, not panicked)

If most wealth is in RRSPs, consider planned withdrawals in your 50s/60s to:

• Reduce the future RRIF size
• Avoid forced large withdrawals later
• Keep income smoother across decades

Smooth beats spiky.

3) Treat the TFSA as a tax-free lever

TFSAs are gold in retirement:

• Withdrawals don’t increase taxable income
• They don’t trigger OAS clawback
• They’re perfect for one-time expenses (car, roof, helping adult kids)

My preference: don’t drain the TFSA early if you have other options; it’s your best “income control” tool later.

One-liner worth keeping: Your TFSA isn’t just a savings account—it’s a clawback shield.

The checklist I’d use before saying “yes, retire now”

Answer first: Before pulling the plug, confirm you can handle three things: a bad early market, rising taxes later, and higher fixed costs (health, home, travel).

Run through this list:

1. Spending target (after tax): What’s your annual number, and what’s optional vs non-negotiable?
2. Bridge plan to 65/70: How will you fund the years before CPP/OAS—RRSP, non-registered, part-time work?
3. Tax map: Project taxable income year-by-year, not just “average.”
4. OAS clawback exposure: Identify years where income could spike (RRIF minimums, big gains, property sale).
5. Rate strategy: Decide how much you want in GICs/cash for stability vs equities for long-term growth.
6. Contingency rules: What would make you cut spending by 5%–10% temporarily?

If you can’t answer those clearly, you’re not “not ready.” You just need a better plan.

Where this leaves the $2.75M question

A $2.75 million portfolio is often enough for Halifax empty nesters to retire early—but the win is keeping your income predictable, taxes manageable, and government benefits optimized. CPP and OAS timing isn’t a footnote; it’s a major lever that interacts with RRSP withdrawals, interest rates, and your long-term tax bill.

If you’re thinking about retiring in 2026 or 2027, now is the moment to model your “gap years” strategy while you still have the most flexibility. Rates will move again, markets will do what they do, and the plan that holds up is the one that doesn’t rely on perfect conditions.

What’s your biggest concern about retiring early—market risk, running out of money, or the tax/clawback side of the puzzle?