Older man working in a warehouse
Many older Canadians hoped that the last Bank of Canada interest rate pause would would bring a sense of financial relief. Instead, rising living costs, family obligations and lingering economic uncertainty are forcing many older Canadians to rethink when — or whether — they can afford to retire.
After a series of interest rate hikes in 2022 and 2023, the Bank of Canada shifted into a more stable monetary policy stance, holding its benchmark interest rate steady at the start of this year.
But for retirees and near-retirees, interest rate stability hasn’t translated into comfortable golden years.
The situation many retirees face isn’t an easy one. While inflation has cooled from its 2022 peak, prices remain structurally higher.
According to Statistics Canada, Canada’s Consumer Price Index (CPI) rose 3.4% year-over-year in December 2024, with shelter, food and insurance costs continuing to drive household budgets higher (1). But cooling interest rates didn’t prompt living costs to come down.
For instance, in the last few years property taxes in many municipalities climbed well above inflation. In Toronto, for example, city councillors approved a 9.5% residential property tax increase for 2024 (2), while residents in North Vancouver reported double-digit property tax increases in 2025.
Auto insurance premiums have also increased in several provinces, particularly Ontario and Alberta, according to industry data from the Insurance Bureau of Canada (3).
For retirees living on fixed pensions, such as the Canada Pension Plan (CPP) and Old Age Security (OAS), those cost increases compound quickly. And even though government benefits are indexed to inflation, the prescribed increases for these benefits may not keep pace with real-world cost pressures in specific categories like housing, utilities and groceries.
“Stability doesn’t offer much comfort when fixed incomes can’t keep pace with rising everyday costs,” explained Ben McCabe, CEO and founder of Bloom Finance, in an interview with Money.ca. “Uncertainty around the broader economy makes long-term planning harder.”
Even for seniors without debt, higher rates ripple through the economy — pushing up borrowing costs for businesses, affecting housing markets and influencing insurance and service costs.
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As a result, many Canadians in their late 50s and 60s are delaying retirement or revisiting their retirement timelines.
Some are choosing phased retirement — reducing hours rather than leaving the workforce completely. Others are returning to part-time or contract work to offset higher costs.
Labour force participation among older Canadians has risen steadily over the past decade. Statistics Canada reports that participation rates among Canadians aged 65 to 69 are significantly higher than they were 20 years ago (4).
McCabe says this shift reflects more than just personal ambition. “Many older Canadians are delaying retirement or reassessing their timelines altogether,” he said. “Retirement feels less predictable than it once did.”
That unpredictability isn’t only about inflation. It’s also about family.
Ongoing higher living costs are also a factor in the rise in multigenerational living in Canada.
According to Statistics Canada, nearly one in three young adults aged 20 to 34 lived with at least one parent in 2021 — a proportion that has been steadily rising over time (5). This data is supported by other, independent surveys, such as Bloom Financial’s latest report, which found that one in three parents and grandparents reported providing financial support to children or grandchildren — and among those who do, 76% say it affects their retirement savings.
Many seniors are helping adult children who now face higher rent costs, expensive student debt or, worse, under- or unemployment. In some households, grandchildren are also part of the financial equation.
“That kind of intergenerational support is increasingly driven by necessity rather than choice,” McCabe said.
For retirees, this means retirement budgets now include more than just their own living costs. Groceries, utilities and housing expenses often stretch to cover multiple generations.
Even with a rate pause and stable inflation, affordability pressure shows up frequently in various factors across the nation.
“Property taxes, insurance, utilities, groceries and healthcare costs continue to rise,” McCabe said. “For many, the challenge isn’t discretionary spending — it’s covering the basics month to month.”
Higher interest rates also magnify strain for seniors who still carry debt, increasing monthly payments and reducing flexibility. Even without debt, elevated rates contribute to broader economic pressures.
As Canada moves into 2026, retirees face a difficult balancing act:
Limited room for emergencies
Smaller financial cushions
Trade-offs between helping family and protecting their own security
For some, that means delaying retirement. For others, it means exploring options such as accessing home equity or returning to work in some capacity.
Regardless of your economic situation, financial planners always advise retirees and near-retirees to revisit their retirement plan assumptions on a regular basis. The need for this review increases dramatically during a period of economic transition.
To help, here are five practical steps any retiree or those close to retirement should consider:
1. Revisit your retirement timeline annually. Retirement is no longer a one-time decision. Reassess income sources, expenses and longevity risk every year. Be ready to shift or adjust based on the review.
2. Stress-test your cash flow. Model scenarios where property taxes, insurance or food costs rise another 5% to 10%. Can your retirement income absorb that increase? If not, brainstorm options for how to adjust to further increased living costs. Even brainstorming options can help overcome fear and uncertainty and help you to proactively address a cash flow crunch.
If you need help stress-testing your finances, consider using a budgeting app. With Monarch Money you can track your spending and create a budget — all in one place. Once you link your bank accounts and investment portfolios, you can see all your transactions in one list, helping you stay on top of your spending. You can also create custom goals for your retirement, personalize categories, and track your progress at all times on the all-in-one money management platform. Monarch offers a seven-day free trial to see if it’s right for you. If you like the platform, you can then get 50% off for your first year with the code WISE50.
3. Factor family obligations into your plan. If you’re helping adult children, formalize expectations. Is support temporary? Is it sustainable? Have honest conversations with adult children and discuss what support looks like (both financial and other).
4. Consider phased retirement. Reducing hours or consulting part-time can extend savings while maintaining flexibility.
5. Protect emergency reserves. Liquidity matters. Unexpected healthcare or home repair costs can derail fixed-income budgets quickly. For that reason, it’s critical to keep a cash-account emergency fund. High-interest savings accounts work well for this type of fund. If a cash account is not possible, consider securing a low-interest line of credit. While taking on debt is not ideal, in retirement, it’s important to realize that access to low-interest debt can often help bridge cash-flow problems.
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The retirement Canadians envisioned a decade ago — lower costs, fewer dependents and stable inflation — looks different today.
Rate stability may signal economic calm at the policy level. But at the household level, many older Canadians are still navigating rising costs, family obligations and an uncertain path forward.
For a growing number, retirement isn’t cancelled — but it is being carefully recalculated.
Statistics Canada (1); City of Toronto (2); ICBC (3); Statistics Canada (4); Statistics Canada (5)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.