Building a Retirement Budget
Before You Retire:
The Numbers Most People Forget

Most pre-retirees plan for the obvious expenses. It’s the ones hiding in the corners — healthcare, inflation, home maintenance — that derail even the best-laid plans.

By Greg -FEBRUARY 2026  ·  10 MIN READ

Ask most Canadians approaching retirement what their monthly expenses will look like and they’ll rattle off the big ones without hesitation: housing, groceries, utilities, maybe a car payment. What they almost universally underestimate — or forget entirely — are the costs that don’t show up on last month’s bank statement but will show up, reliably, in retirement.

Building an accurate retirement budget isn’t just a financial exercise. It’s the foundation that tells you whether you can actually afford to retire when you want to, how much you need to draw from your accounts each year, and whether your savings will last. Get it wrong and you risk outliving your money. Get it right and you retire with confidence.

Here’s how to build one — and the numbers most people leave off.

Start With What You Already Know

Before hunting for the forgotten costs, anchor your budget in your current spending. Pull your last 12 months of bank and credit card statements and categorize every dollar. This is your baseline — what you actually spend, not what you think you spend.

Now make two adjustments. First, remove the expenses that will disappear in retirement: commuting costs, work clothing, contributions to your RRSP, CPP premiums, and any debt payments you plan to clear before you stop working. Second, add a realistic estimate for the things you plan to do more of — travel, hobbies, dining out — because for most people, the early years of retirement are moreexpensive than their working years, not less.

“The early years of retirement are often the most expensive — not the least. Budget for the life you actually want to live, not the one that looks good on paper.”

The Four Budget Categories

CATEGORY 1

Essential Fixed Costs

• Housing (mortgage or rent)
• Property taxes
• Utilities & internet
• Groceries
• Insurance (home, auto, life)
• Transportation

CATEGORY 2

Lifestyle & Discretionary

• Travel & vacations
• Dining & entertainment
• Hobbies & recreation
• Clothing & personal care
• Gifts & charitable giving
• Subscriptions & memberships

CATEGORY 3 — OFTEN MISSED

Healthcare & Aging Costs

• Prescription drugs
• Dental & vision care
• Hearing aids & aids
• Paramedical services
• Long-term care insurance
• Home care or support

CATEGORY 4 — OFTEN MISSED

Home & Irregular Costs

• Home repairs & maintenance
• Appliance replacements
• Vehicle replacement
• Emergency fund top-ups
• Estate & legal fees
• Tax preparation

The Numbers Most People Forget

Categories one and two are relatively easy to estimate. It’s categories three and four — and a few items that don’t fit neatly into any box — that tend to blindside retirees. Here’s what to watch for:

• 🏥Healthcare costs after employer coverage endsIf you’re currently covered by an employer benefits plan, that coverage likely ends the day you retire. Suddenly, dental cleanings, prescription drugs, physiotherapy, and vision care are coming entirely out of pocket. A couple retiring in their early 60s can easily spend $4,000–$8,000 per year on healthcare before provincial drug plans kick in at 65. Budget for private health insurance premiums until you qualify for provincial coverage — and even then, budget for the gaps.
• 🦷Dental care — the real numberDental is one of the biggest budget surprises for retirees. A single crown can cost $1,500–$2,500. Two cleanings a year, plus the occasional filling, x-rays, and one larger procedure every few years, and a couple can easily spend $3,000–$5,000 annually without a benefits plan. Factor this in explicitly — don’t lump it vaguely into “healthcare.”
• 🏠Home maintenance — the 1% ruleFinancial planners often use a rule of thumb: budget approximately 1% of your home’s value per year for maintenance and repairs. On a $700,000 home, that’s $7,000 per year. Some years you’ll spend less. Others — a new roof, a furnace replacement, a foundation repair — you’ll spend significantly more. This cost is irregular and easy to forget, but it’s as reliable as any other expense you’ll face.
• 📈Inflation — especially on the things you buy mostA budget that works at 65 may be strained at 75 and broken at 85 if you haven’t factored in inflation. At just 2.5% annual inflation, your purchasing power is cut nearly in half over 30 years. Groceries, healthcare, and services — the things retirees spend the most on — tend to inflate faster than the headline rate. Build in an annual increase of at least 2–3% on all your expense categories.
• 🚗Vehicle replacementMost people budget for car insurance and fuel but forget that vehicles need to be replaced. If you plan to keep a car in retirement, expect to replace it every 8–12 years. At today’s prices, that’s $30,000–$50,000 — which works out to roughly $250–$500 per month when amortized. Set aside a dedicated “car replacement” fund rather than absorbing the shock when it happens.
• 👴Long-term care and support costsThis is the one most Canadians don’t want to think about — but the numbers are stark. The average Canadian who needs long-term care requires it for 2–3 years. Private long-term care facilities in Canada can cost $4,000–$10,000 per month. Even publicly subsidized care comes with a co-payment based on income. Whether through insurance or a dedicated savings buffer, this cost deserves a line in your retirement plan.
• 👨‍👩‍👧Family support and giftingMany retirees underestimate how much they’ll give to family — helping adult children with a home down payment, supporting grandchildren’s education through an RESP contribution, or simply picking up more tabs at family dinners. These aren’t irresponsible expenses, but they add up. If gifting and family support are important to you, build them into the plan explicitly rather than letting them erode your savings informally.

A Sample Retirement Budget: What It Actually Looks Like

Here’s an example monthly budget for a Canadian couple retiring in their mid-60s in a mid-sized city, owning their home outright. These are rough benchmarks — your numbers will vary significantly based on lifestyle, location, and health.

Category	Monthly Estimate	Annual Total
HOUSING (PROPERTY TAX, UTILITIES, INSURANCE)	$1,400	$16,800
GROCERIES & DINING	$1,200	$14,400
TRANSPORTATION (INSURANCE, FUEL, MAINTENANCE)	$700	$8,400
TRAVEL & VACATIONS	$800	$9,600
HEALTHCARE & DENTAL (NO EMPLOYER PLAN)	$600	$7,200
HOBBIES, ENTERTAINMENT & PERSONAL	$500	$6,000
HOME MAINTENANCE RESERVE (1% RULE)	$580	$7,000
VEHICLE REPLACEMENT RESERVE	$350	$4,200
GIFTS, FAMILY & CHARITABLE GIVING	$300	$3,600
MISCELLANEOUS & BUFFER	$300	$3,600
TOTAL	$6,730 / month	~$80,800 / year

Does $80,800 per year surprise you? It surprises many people. And this budget doesn’t include long-term care costs, a major home repair, or a significant one-time medical expense. It also doesn’t account for inflation in years 10, 15, or 20 of retirement.

THE 70–80% RULE — AND WHY IT CAN MISLEAD

You’ve likely heard that you’ll need 70–80% of your pre-retirement income in retirement. It’s a useful starting point, but it can seriously underestimate costs for people who plan to travel frequently, support family, or face significant healthcare needs. Build your budget from the ground up — don’t rely on a percentage shortcut for something this important.

How to Build Your Own Retirement Budget in 5 Steps

1

Track your actual spending for 12 monthsUse your bank and credit card statements. The goal is real numbers, not estimates. Most people discover they spend 10–20% more than they thought.

2

Remove working-life expensesSubtract commuting, work clothes, CPP premiums, RRSP contributions, and any debt payments you’ll clear before retirement. These dollars free up room for retirement-specific costs.

3

Add the forgotten categoriesUse the list above. Be conservative — overestimating costs is far safer than underestimating them. Add a dedicated line for healthcare, home maintenance, and vehicle replacement.

4

Apply an inflation factorIncrease your total annual budget by 2.5–3% per year in your projections. Run the numbers at age 70, 75, 80, and 85 to see what you’ll actually need — not just in year one.

5

Compare against your income sourcesStack your projected budget against your expected CPP, OAS, pension income, and planned account withdrawals. The gap — if there is one — tells you exactly how hard your savings need to work.

The Bottom Line

A retirement budget built only on the obvious expenses is a retirement plan waiting to be disrupted. Healthcare, home maintenance, inflation, vehicle replacement, and family support aren’t surprises — they’re certainties. The only question is whether you’ve planned for them.

The best time to build a detailed retirement budget is three to five years before you stop working, when you still have time to adjust your savings rate, your timeline, or your expectations. A thorough budget doesn’t just tell you how much you need — it tells you whether your plan is real.

That kind of clarity is worth more than any single investment return.

This article is for informational purposes only and does not constitute financial or tax advice. Expense estimates are illustrative and will vary based on individual circumstances, location, and lifestyle. Please consult a qualified financial advisor for guidance tailored to your personal situation.

BUDGET REALITY CHECK

~$81K Estimated annual spending for a retired Canadian couple in a mid-sized city

1%Of home value to budget annually for maintenance & repairs

2–3%Annual inflation factor to apply to your retirement budget projections

30 yrsHow long your retirement could last — plan for it

PRE-RETIREMENT CHECKLIST

• Track actual spending for 12 months
• Price out private health insurance
• Add home maintenance reserve
• Account for vehicle replacement
• Model inflation at age 75, 80, 85
• Budget for dental explicitly
• Consider long-term care costs
• Include family gifting goals

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For informational purposes only  ·  Not financial advice

Thanks for reading ,

Greg