Common Retirement Planning Mistakes in Canada — and How to Avoid Them

Retirement planning is unforgiving in a particular way: many of its mistakes are invisible at the time and only reveal themselves years later, when they are difficult or impossible to undo. A pension started too early, a withdrawal order chosen by habit, a tax spike no one saw coming. The good news is that the common errors are well understood, and nearly all of them are avoidable with a coordinated plan.

This article is for Canadians in Ottawa and across Ontario approaching or in retirement who would rather learn from these mistakes than make them. Below are the ones we see most often, and the practical way to avoid each.

Mistake 1: defaulting on CPP and OAS timing

Many people start CPP and OAS at the first opportunity, or at 65 by default, without analysing whether that serves them. Because both pensions increase substantially for each month you defer, and because they are guaranteed for life and partly indexed to inflation, the timing decision is one of the most valuable in retirement.

Starting CPP at 60 permanently reduces it by about 36% versus 65; deferring to 70 raises it by about 42%. OAS rises about 36% if deferred to 70. The right choice depends on your health, your other income, and your tax picture, but defaulting without thought leaves guaranteed income on the table. Our guide on CPP versus OAS explains how to approach each.

Mistake 2: ignoring the order of withdrawals

Retirees often draw from whatever account is most convenient, which is rarely the most efficient. The sequence in which you draw from non-registered savings, TFSA, RRSP or RRIF, and pensions affects your tax every year and your government benefits over the whole of retirement.

A thoughtful order uses lower-income years, such as before pensions start, to realize taxable income at lower rates, preserves tax-free compounding where sensible, and avoids pushing any single year’s income into a higher bracket or into clawback territory. Our guide on retirement withdrawal order in Canada sets out the principles in detail.

Mistake 3: overlooking tax and the OAS clawback

Tax does not stop at retirement; it often becomes more complex, because you control more of the timing. Two traps stand out.

Trap	What happens	How to manage it
OAS clawback	Income above the threshold reduces OAS	Smooth income, use TFSA, split pension income
RRIF minimum spikes	Required minimums rise with age, lifting taxable income	Draw RRSP or RRIF down earlier in low-income years

Both traps stem from the same cause: letting taxable income climb too high in later years. Drawing registered balances down earlier, during lower-income periods, can reduce both the clawback risk and the sting of rising RRIF minimums. Our guide on RRSP-to-RRIF conversion covers the mechanics.

Mistake 4: underestimating longevity

People routinely plan for a retirement shorter than the one they get. Planning to age 85 when you may live to 95 leaves a decade unfunded, and running out of money late in life is among the hardest situations to recover from, because your capacity to earn is gone.

The fix is to plan for a long life deliberately. That may mean a more conservative withdrawal rate, delaying pensions for larger guaranteed income, or using a portion of savings to secure lifelong income. Guaranteed income sources, such as a delayed CPP or an annuity covering essential expenses, are a direct defence against longevity risk. Our guide on annuities in Canada explains that option.

Mistake 5: forgetting about inflation

A dollar of income that feels ample at 65 buys noticeably less at 85. Over a retirement that may span thirty years, even modest inflation erodes purchasing power significantly, and plans that assume today’s costs will hold are quietly optimistic.

Protecting against this means keeping some growth in the portfolio rather than shifting entirely to cash and fixed income, valuing the inflation protection built into CPP and OAS, and, where used, considering indexed options on guaranteed income. The goal is income that keeps pace with the cost of living, not just income that looks sufficient on day one.

Mistake 6: reacting emotionally to markets

The most expensive behaviour in retirement is panic. Selling investments during a downturn locks in losses, and doing so in the early years of retirement is especially damaging because you are also withdrawing, a combination known as sequence-of-returns risk. A poor sequence of returns early on can permanently shorten how long a portfolio lasts, even if average returns over time are fine.

The defences are structural and behavioural: hold enough safe, accessible assets to fund a few years of spending so you are never forced to sell at a bad time, keep a disciplined withdrawal approach, and resist the urge to act on headlines. Our guides on sequence-of-returns risk and what to do in market volatility go deeper on both.

Mistake 7: treating the plan as finished

A retirement plan built once and never revisited drifts out of date as tax rules change, markets move, and life evolves. The final mistake is simply neglect: failing to review the plan each year, adjust withdrawals, and respond to changes in your health, your spending, or the rules.

A plan is a living document. The households that fare best treat retirement planning as an ongoing relationship with their numbers rather than a one-time exercise completed at 65. Tax rules shift, markets move, spending patterns change, and health evolves, and a plan that is never revisited slowly stops describing the life it was built for. An annual review is not busywork; it is the mechanism that keeps every other decision in this article from quietly drifting off course.

Mistake 8: planning each decision in isolation

The thread running through most of the mistakes above is isolation. Each decision, when CPP starts, which account to draw from, how much to withdraw, how much risk to hold, is made on its own, without regard to how it affects the others. That is where the real damage happens, because these decisions interact.

Starting CPP early changes your taxable income, which changes your clawback exposure, which changes the optimal withdrawal order, which changes how long your portfolio lasts. Pull one lever in isolation and you can quietly worsen three other outcomes. The households that retire well are not the ones who got every individual decision perfect; they are the ones who made the decisions together, as a system.

Building a plan that avoids these

Avoiding the common mistakes does not require genius, only coordination and review. A sound retirement plan does a few things deliberately:

• Models the timing of CPP and OAS against your other income, rather than defaulting.
• Sets a withdrawal order designed to smooth tax and protect government benefits across the whole of retirement.
• Holds enough safe, accessible assets to fund several years of spending, so a downturn never forces a bad sale.
• Plans for a long life and for inflation, not just for the early, comfortable years.
• Gets reviewed every year and after every major change, so it stays current.

None of this guarantees a particular outcome, and no plan can remove market risk. What a coordinated plan does is remove the avoidable mistakes, the ones that come from acting by default or in isolation, which is where most of the preventable damage in retirement comes from. Our guide on how to generate retirement income brings these threads together.

How Kevin Hayes Financial Services can help

Nearly every mistake above comes down to the same thing: decisions that interact, made in isolation. Coordinating pension timing, withdrawal order, tax, longevity, and behaviour is precisely where a complete plan earns its keep. Our practice helps retirees across Ottawa and Ontario avoid these pitfalls and keep their plans current. Book a private consultation to pressure-test your own plan, or learn more about our approach to retirement planning and tax planning.