The Best Free Retirement Calculators in Canada
How much money will you be able to spend in retirement? It sounds like a simple question, but it can be difficult to figure out. Canadians have to piece together retirement income from multiple different sources. These income streams may start at different times, be variable from year to year, and they might erode over time due to inflation.
There are many free retirement planning tools online, but you don't want to rely on faulty calculations. I tested 17 free retirement calculators to find out which, if any, can be reliably used to forecast income. In this article, I'll review the best and the worst, as well as common pitfalls to watch out for.
Retirement Planning Challenges
Before getting to the reviews, I want to touch on a few points about creating retirement projections. These tools are almost too easy to use. Being able to plug in numbers and get a plausible-looking result can hide errors.
There are a few things that have to be done correctly to get good results:
Understand each data entry point: You need to know exactly what each term means and how the data entry affects the output. This is not always as simple as it seems. While testing, I was constantly switching between data entry, the results page, and the assumptions disclaimer to make sure I understood what was going on.
Use good assumptions: Small changes in the assumptions used for investment returns and life expectancy can make a big difference in the results.
Many of the tools will have default settings, but they may not be appropriate for your situation. Default settings are powerful because if people don't know what to use, they're unlikely to change them. For example, I was disappointed to see the federal government calculator use average life expectancy as the default. The problem is that half of Canadians will live longer than average!
Use good data: Trying to figure out how much income to expect from CPP and pensions can take some work. It is critical to get these amounts right however since they will form the foundation of your retirement income.
It's also important to know if your pension comes with annual inflation increases or not. Many don’t, but even the pensions with it will only have partial indexing.
Common Shortcomings
As a Certified Financial Planner®, I've created hundreds of retirement plans. Every financial calculator has strengths and weaknesses, including the professional options. A knowledgeable financial planner will be aware of these weaknesses and work around them.
Here are some common flaws I saw when reviewing these tools:
No control for CPP/OAS
No control for investment returns
Grouping RRSP/TFSA into one pot
No settings to stay within RRSP/TFSA contribution limits
Gross income target instead of net after-tax
Pension assumed to increase with inflation
No ability to indicate areas for improvement
Reports with little/no detail
Gross vs Net Income
The only item on the list above that isn't a serious issue is using a gross income target. Most people want to know how much they can spend in retirement, so net income would be more useful. To find the net value, you'll need to take the gross amount and enter it into a tax calculator.
A related problem is using the rule of thumb of needing 70% of your gross income in retirement. Each person's situation can vary so much that this estimate isn't very useful. Knowing your actual spending needs will help you really get the most out of these tools.
Detailed Reports
While many people would like a simple answer from a calculator, the lack of detailed reports is a big shortcoming for many of these tools. If you're relying on these calculations to decide when to quit, then you want to make sure that the numbers are correct. Without limited reports, there often isn't enough information to verify the results.
Testing Parameters
To compare all of the calculators, I created Bob, a fictional Canadian from Ontario:
Male Age 55
$100,000 employment income
Retire at 60
Life expectancy 94
$10,000 pension
$10,000 CPP at 65
Full OAS
$500,000 RRSP
$50,000 TFSA
These free calculators can barely handle a single person, so I wouldn't trust them for couples. Optimizing retirement income for a couple who are likely to be different ages, retiring at different times, and have different levels of income simply adds too much complexity for these free tools to handle.
The 3 Worst Retirement Calculators
When reviewing these free tools, I asked myself if I would be able to use them to help clients. The answer for each of these is a clear "No". Let's look at why:
Wealthsimple
Cons
RRSP and TFSA grouped together
Average CPP and Max OAS. Can't change
Very conservative net RoR in retirement of 2.77%. Can't change.
Very limited report/output
Unclear if other income is adjusted to inflation
I was able to include Bob's pension, but I couldn't tell if this amount would increase with inflation or not. Annual pension cost of living adjustments make a HUGE difference over 30+ years. With just the one summary graph it was impossible to figure this out.
There is also a field to enter province of residence, but it doesn’t seem to do anything at all.
Sun Life
Cons
Low CPP and OAS. Can't change
Old data for OAS (2016) and tax (2021)
Average tax rate across all provinces?!
Very limited report/output
I like that they tried to calculate net income, but they went halfway by trying to use some weird set of averaged marginal tax brackets. Each province has different thresholds for their income brackets, so creating an average isn’t very useful.
Using old data for OAS shows that they don't care enough to keep it up to date. But I wouldn't have known this if I didn't check the assumptions section. Make sure you understand all the assumptions of any tool you use!
TD
Cons
Fixed investment returns. 5% pre-retirement and 2% afterwards.
Inflation fixed at 2%
Only 3 options for gross income target: 60/70/80%
No ability to check year-by-year calculations
Average CPP (2017) and Max OAS (2017?). Can't change
More of the same: lack of control and limited output. No way to really evaluate the results of this calculator due to the lack of details.
The 3 Best Retirement Calculators
Now let's look at the best of the free tools.
Disclaimer: I can't fully endorse any of these tools. Since I can't see "under the hood", there could be issues that I'm not aware of. But Bob's results with these three came reasonably close to my professional planning software.
Desjardins
Pros
Reasonable defaults for returns and life expectancy, with a custom option
Can adjust and defer CPP and OAS
Detailed income breakdown on the results page
Cons
Uses gross income target
The inflation rate is unclear
Pension assumed to have full COLA
This is a good example of having enough data in the output to be useful. I couldn't find inflation being listed anywhere, but I was able to work it out based on the change in value of the investments over time. Works out to inflation of 2.1%
For those with a defined-benefit pension, be aware that this tool assumes a pension reduction at age 65. Not all pensions have this feature, so it's important to understand how yours works and to adjust accordingly.
There is an option to choose Ontario or Quebec as the province of residence, but since this tool uses gross income, I haven't been able to work out what changes.
Mawer
Pros
Net spending target, and can choose province for tax
Can include future lump sum income/expense
The risk slider is nice
Cons
Age 90 life expectancy, can't adjust.
Need to manually enter OAS
Lack of info on the table report
This was the only tool to make a serious effort to calculate after-tax spending. Unfortunately, there isn't enough info to verify the accuracy of the calculations.
I also found it strange that they chose to leave out OAS by default. Some people could forget to include it. The input for other retirement income is also fully adjusted for inflation, so this might not be a good choice if you have a lot of pension income.
CCH
Pros
Sliders make for quick adjustments
Can turn off pension inflation increases
Can adjust pre- and post-retirement returns
Cons
RRSP and TFSA grouped together
Uses gross income target
No option for additional retirement income
This tool was great for making quick changes to see how the results would change. Just don't be tempted to crank up the return expectation to make the numbers say what you want them to.
Overall there is a fair bit of flexibility in this calculator which is nice. The option to change the annual income increases before retirement is useful, especially for younger Canadians. Being able to change the rate of return before and after retirement is also an important option to include.
Others Tools
Here is a list of the other free retirement calculators I looked at. They generally have at least a few of the common shortcomings discussed. If you know of others, please reach out to let me know.
Government of Canada
PERC
CIBC
MD
Fidelity
Raymond James
Get Smarter About Money
Scotia
Edward Jones
Canada Life
Creating a Retirement Plan
Finally, these tools create financial projections and they do not replace the work of a financial planner. A qualified financial planner can also help with:
Cash flow and debt management
RRSP drawdown strategies
Risk management
Tax planning
Estate planning
If you’d like to get started with your retirement plan, download my FREE retirement planning checklist.
If you’re feeling overwhelmed by all the work needed to create a plan, you can book a free introductory meeting with me.