Chapter 4 of 13
Set realistic retirement goals
Turn lifestyle, housing, travel, family, and care expectations into practical numbers.
4.1 Define lifestyle goals
Goal area Questions to answer
Retirement date Stop fully, phase down, consult, or work seasonally?
Housing Stay, renovate, downsize, rent, move near family, or keep a second property?
Travel and lifestyle What annual after-tax amount is realistic for travel, hobbies, dining, gifts, and vehicles?
Family support Will you support children, grandchildren, a spouse, siblings, or parents?
What budget is available for dental, drugs, Health and care therapy, home care, private care, and accessibility?
Legacy Maximize lifetime spending, preserve an estate, donate, or balance all three?
4.2 Convert goals into numbers
Build an annual after-tax cash-flow budget in today's dollars, then model inflation separately. Include irregular and replacement costs, not only monthly bills. Note which income streams are indexed (CPP and OAS are indexed; many employer pensions and most fixed annuities are only partly indexed or not indexed at all) — unindexed income loses purchasing power over a long retirement.
4.3 Use scenarios instead of one forecast
Scenario Assumptions What it tests
Base Expected spending, returns, Main working plan. inflation, CPP/OAS timing.
| Scenario | Assumptions | What to assess |
|---|---|---|
| Cautious | Lower returns, higher inflation/tax, larger health costs. | Whether the plan remains acceptable. |
| Stress | Early market decline, spouse death, major repair, care need, or housing move. | What corrections are available under pressure. |
| Long-life | One or both live well beyond average life expectancy. | Longevity protection and late-life liquidity. |
4.4 Housing transition and downsizing economics (new in v6.3)
For most Ontario retirees the home is the largest single asset and the biggest source of both potential liquidity and hidden cost. Treat a move as a financial decision with its own budget, not just a lifestyle choice.
| Housing option | What to weigh | Watch for |
|---|---|---|
| Stay and age in place | Renovation and accessibility cost vs. moving cost; §7.3; ongoing maintenance and property tax. | Change-in-use/PRE risk if creating a secondary suite §7.6 rising upkeep as mobility declines. |
Land transfer tax on the new purchase (provincial, plus a Net equity freed after all separate municipal land Downsize (buy smaller) transaction costs; simpler transfer tax in the City of upkeep; possible condo fees. Toronto); condo fees and special assessments; timing gap between sale and purchase.
| Housing option | What to weigh | Watch for |
|---|---|---|
| Sell and rent | Frees full equity to invest; predictable monthly cost; no maintenance/repair risk. | Rent inflation and security of tenure; investment income from proceeds may raise net income and affect income-tested benefits. |
| Life lease / co-op / seniors' community | Community, services, and lower maintenance. | Entry/exit terms, resale restrictions, and how the "deposit" is returned; read the contract with a lawyer. |
| Reverse mortgage / HELOC | Accesses home equity without selling; can bridge income. | Compounding interest can erode estate value; HELOC payments and rate risk in retirement; strict conditions. Get independent advice before signing. |
- Budget all transaction costs before assuming a move "frees up" a specific amount: real estate commission, legal fees, moving, staging/repairs, land transfer tax on the next home, and any bridge financing.
- The Principal Residence Exemption (§7.6) generally shelters the gain on a qualifying principal residence, but a cottage or second property usually does not — coordinate which property is designated.
- Investing sale proceeds shifts a tax-sheltered asset (the home) into taxable investments; model the effect on net income, OAS recovery, and GIS/GAINS.
- Coordinate any move with survivor planning (§8.4): can the surviving spouse manage, afford, and physically maintain the chosen housing?
Educational guide only. Rules and benefit amounts change. Confirm important decisions with official sources and qualified professionals.