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Why a Spending Plan Matters
In retirement, you shift from accumulating wealth to drawing it down. A spending plan ensures you don't outlive your money while still enjoying the retirement you've earned.
Unlike a budget (which can feel restrictive), a spending plan is about aligning your money with your priorities.
Step 1: Calculate Your Income
List all retirement income sources:
- CPP/QPP monthly benefit
- OAS (and GIS if applicable)
- Employer pension
- RRIF minimum withdrawals
- TFSA withdrawals (flexible)
- Non-registered investment income
- Part-time work or rental income
💡 Note: Know which income sources are guaranteed (CPP, OAS, pensions) versus variable (investment returns). Build your essential expenses around guaranteed income.
Step 2: Categorize Expenses
Essential Expenses
- Housing (mortgage/rent, taxes, insurance, utilities)
- Food and household supplies
- Healthcare and medications
- Transportation
- Insurance premiums
- Debt payments
Lifestyle Expenses
- Travel and vacations
- Hobbies and entertainment
- Dining out
- Gifts
- Charitable donations
Irregular Expenses
- Home repairs and maintenance
- Vehicle replacement
- Major healthcare costs
- Helping family members
Step 3: Match Income to Expenses
Compare your total income to total expenses:
- Income > Expenses: You have buffer for unexpected costs or legacy
- Income = Expenses: Sustainable but watch for inflation
- Income < Expenses: Need to reduce spending or draw down capital
The Withdrawal Strategy
A common guideline is the 4% rule—withdraw 4% of your portfolio in year one, then adjust for inflation annually. However, many retirees need flexibility:
- Spend more in early, active retirement years
- Reduce spending in later years as activity decreases
- Have contingency plans for market downturns
- Consider annuities for baseline guaranteed income
Plan for Inflation
Your expenses will increase over time. Factor in 2-3% annual increases, and remember that healthcare costs often rise faster than general inflation.
Review and Adjust
Review your spending plan annually. Life circumstances change—your plan should too. Track actual spending against your plan and make adjustments as needed.
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About Maple Wealth Guide
Maple Wealth Guide is an independent Canadian financial education website. Our team of educational writers researches and explains investment concepts, retirement-related topics, and personal finance information for Canadians aged 50 and over. We are not licensed financial advisors and do not provide personalized recommendations. All content is for educational purposes only.