I'm 60 and Retiring in Five Years.
What Is My XEQT Plan?
Five years is not long. But it is long enough to make deliberate decisions that will define how your money works for the 25 years after you stop earning.
The reality of being 60 with five years left
Five years sounds like a long time when you are in the middle of raising children or building a career. From where you are standing at 60, it is not long at all. But it is exactly long enough to make the structural decisions that will shape the next quarter century of your financial life.
This is the highest-stakes period of the investing lifecycle. Not because anything has gone wrong or is likely to, but because the decisions made between 60 and 65 carry compounding consequences for a period three to five times as long. A 2% allocation mistake made at 35 matters for a decade at most. The same mistake at 60, deployed across 25 years of retirement, costs far more in real dollar terms. The same logic applies to CPP timing, RRSP drawdown decisions, and account sequencing. Getting them right here is worth more than any individual investment choice in your accumulation years.
Here is the encouraging reality: XEQT and the disciplined investing habits that brought you to 60 with a meaningful portfolio have already done the heavy lifting. The question now is not whether the investment is right. XEQT is still a globally diversified, low-cost, well-constructed fund. The question is how to manage the transition from pure accumulation to a structure that generates income reliably for as long as you live, which for a healthy 60-year-old in Canada could easily be another 30 years.
Statistics Canada's 2023 life tables show that a 60-year-old Canadian man has a life expectancy of approximately 84. A 60-year-old woman, approximately 87. Planning to age 90 or 95 is not pessimistic; it is statistically prudent. A 30-year retirement is the median outcome, not the long tail. Any retirement income strategy that only works to age 80 is not a complete plan.
The five-year window is also a window of action, not just planning. The decisions that need to be made now include: transitioning the portfolio to the right equity allocation for retirement, building the structural cash buffer, beginning or accelerating the RRSP meltdown, and modelling CPP and OAS timing with real numbers. None of these require a financial advisor. They require clarity, a spreadsheet, and about a weekend's worth of focused attention.
Sequence risk is at its highest point right now
Sequence of returns risk is the danger of a significant bear market in the years immediately before or after retirement. At 60, with retirement five years away, you are in the highest-risk window for this specific type of damage.
Consider the precedents. In 2008, global equity markets fell approximately 45% from peak to trough. In 2020, markets fell 30% in a matter of weeks. In 2022, a 60/40 portfolio had one of its worst years in decades, falling roughly 16%. Each of these events, arriving in the two years before retirement, would have forced a choice: sell equity at a discount to fund living expenses, or delay retirement. Neither outcome is catastrophic on its own, but both are significantly worse than outcomes for those who retired in 2010, 2021, or 2023.
The important point is what the solution is not. It is not to move entirely out of equity into GICs or bonds. A bond-heavy portfolio in a 25-year retirement has its own severe failure mode: it runs out of money slowly. A 60/40 portfolio growing at 4% nominal over 25 years against a 3.5% annual withdrawal has a meaningful probability of depletion. An 80/20 portfolio at 6% nominal with the same withdrawal is substantially safer over the long run.
The solution to sequence risk is structural, not allocational. Build a two-year cash buffer. Maintain meaningful equity exposure. Ride out bear markets from cash for the first two years while the equity portfolio recovers. After two years, historical data from every major bear market in the last 50 years shows substantial recovery. The 2008 to 2009 bear market lasted 17 months from peak to trough and the S&P 500 fully recovered within 4 years. The 2020 crash recovered within 6 months. The structural buffer is not a sacrifice of return; it is the removal of the scenario where you are forced to sell at the bottom.
A two-year cash buffer covers the worst realistic scenario in this historical dataset with one exception (the dot-com bust). For an investor willing to hold three years in cash, the historical coverage is essentially complete. The trade-off in held cash is real but modest against the protection it provides at the most vulnerable moment of the investing lifecycle.
Where your portfolio should be at 60
If you came to 60 with 100% XEQT, the question now is not whether to adjust but how far. The right answer for most people at 60, five years from retirement, is 70 to 80% equity, not 100%, and definitely not 40% or below.
XGRO at 80/20 is the natural landing point for most 60-year-olds planning to retire at 65. It maintains meaningful equity exposure for long-term growth while the 20% fixed income allocation meaningfully reduces short-term volatility. BlackRock's reported 10-year annualized return for XGRO through 2024 was approximately 7.8% in Canadian dollar terms. That is materially better than most bond-heavy alternatives while the volatility reduction versus XEQT is also real.
XBAL at 60/40 is appropriate for a specific subset of 60-year-olds: those with no pension income of any kind, high anxiety about short-term portfolio swings, or unusual reasons to expect a shorter-than-average retirement. For this group, the reduced expected return of XBAL is a reasonable trade for the reduced volatility. But for the average 60-year-old with CPP, OAS, and a modest portfolio, accepting the lower expected return of XBAL in exchange for incremental short-term stability is not a mathematically compelling choice over a 25-year horizon.
Staying 100% in XEQT at 60 is defensible under a narrow set of conditions: a very large portfolio where sequence risk is mathematically contained, a defined benefit pension that covers the majority of retirement income, or a personal determination that you have both the financial capacity and the emotional constitution to ride out a significant drawdown in the years immediately around retirement without changing behaviour. This last condition is harder to satisfy than most people expect. Studies of investor behaviour in 2008 and 2020 show that even highly experienced investors significantly increased cash holdings near market bottoms.
The SPIVA Canada Scorecard confirms that actively managed funds underperform their benchmarks over 15-year periods in more than 90% of cases. XEQT and XGRO are not being criticized here. The question is only which tool is right for which job. At 60 with five years to retirement, XGRO is the right tool for most people.
One thing that is almost certainly wrong at 60: being entirely in bonds, GICs, or a balanced fund with 40% or more fixed income. The return mathematics do not support it. A 60-year-old moving to 40% equity is accepting returns that will struggle to outpace inflation over the 25+ year period ahead. The fear that drives people to over-bond their portfolios in the early 60s is understandable. But the data does not support acting on it.
Building the two-year cash buffer
The two-year cash buffer is not optional at 60. It is the most important single structural move for a pre-retirement investor, and building it over the next five years is the clearest priority on this list.
The buffer is simple in concept: two years of expected annual retirement expenses, held in a high-interest savings account (HISA) or a one-year and two-year GIC ladder, outside the investment portfolio. If your retirement budget is $40,000 per year, the buffer is $80,000. If it is $60,000 per year, the buffer is $120,000. It is not counted as part of your investable assets for planning purposes; it is a structural tool.
Here is how it works in a bear market. You retire at 65. Six months later, markets fall 30% and your XGRO portfolio declines from $800,000 to $560,000. Without a buffer, you have an unpleasant choice: sell XGRO at a 30% discount to fund the year's expenses, or cut your lifestyle dramatically. With the buffer in place, you draw your living expenses from cash for the full year. Markets begin recovering. In year two, you continue drawing from cash while the equity portfolio recovers further. By year three, your XGRO portfolio has recovered to near its original level, and you begin drawing from it again at a better price. The bear market happened. You did not participate in the selling pressure at the bottom because you had no need to.
A GIC ladder is preferable to a plain HISA for the buffer once you are within two years of retirement, because GICs typically offer better rates and the fixed maturity dates align naturally with the annual withdrawal schedule. A one-year GIC maturing each year, funded from portfolio withdrawals in good markets, creates a self-renewing buffer structure with higher interest income than cash alone.
One practical note on where the buffer money comes from. If building $80,000 to $120,000 in cash over five years while still contributing to an RRSP feels like too much, consider rebalancing priorities. The tax benefit of new RRSP contributions at 60 is still valuable, but not more valuable than structural protection against a sequence-of-returns event in the five years before retirement. If a trade-off is necessary, the buffer takes priority over marginal new contributions, especially if the RRSP is already substantial.
The CPP decision at 60
You can begin CPP as early as age 60. You almost certainly should not. The CPP timing decision is the highest-value financial lever available to a 60-year-old in Canada, and taking it at the earliest possible moment leaves a significant and permanent sum on the table.
The mechanics are clear. CPP taken at 60 is reduced by 0.6% per month for every month before age 65, a total reduction of 36%. On a maximum benefit of $1,433 per month at 65, taking CPP at 60 means approximately $917 per month. Taking it at 65 means $1,433. Taking it at 70 means approximately $2,034 per month, indexed to inflation, for life. The gap between 60 and 70 is $1,117 per month, every month, for the rest of your life.
Taking CPP early at 60 makes financial sense in a very narrow set of circumstances: severe health issues that meaningfully reduce life expectancy, complete absence of any other income source in the early 60s, or extraordinary personal circumstances. For the average 60-year-old in reasonable health with a modest portfolio, taking CPP at 60 is one of the most expensive financial decisions available. The break-even for taking at 60 versus 65 is approximately age 74. The break-even for 65 versus 70 is approximately age 83. Given that Statistics Canada's 2023 life tables show life expectancy of 84 for men and 87 for women at age 60, the majority of current 60-year-olds will outlive both break-evens.
| CPP Start Age | Monthly Benefit | Annual Benefit | Lifetime Value at Age 90 |
|---|---|---|---|
| Age 60 | $917 | $11,004 | $329,220 (30 yrs) |
| Age 65 | $1,433 | $17,196 | $431,640 (25 yrs) |
| Age 70 | $2,034 | $24,408 | $490,560 (20 yrs) |
The inflation indexing of CPP makes the deferral even more powerful over time. CPP is indexed to the Consumer Price Index. At 3% annual inflation, the $2,034 per month CPP starting at age 70 is worth $2,731 per month in real 2026 dollars by age 80. Each year of deferral beyond 65 increases this indexed income stream permanently. There is no GIC, no savings account, and no bond that offers a comparable guaranteed, inflation-indexed, lifetime income stream in Canada.
What does this mean practically at 60? It means building a plan to defer CPP, preferably to 70, and identifying the income sources that will bridge the gap from 60 to when CPP begins. For most people, that bridge is RRSP withdrawals in low-income years combined with TFSA drawdown as needed. The RRSP meltdown strategy is described in the next section.
The RRSP meltdown: final window
Between 60 and 71, you are in the final window for deliberately reducing your RRSP balance before mandatory RRIF conversions begin. This window is arguably the most financially valuable decade-long opportunity in Canadian personal finance, and most people either do not know it exists or wait too long to use it.
Here is the problem the meltdown solves. At age 71, every RRSP must become a RRIF. Mandatory minimum withdrawals then begin at 5.28% of the balance and increase each year. On a $600,000 RRIF, that is approximately $31,680 in year one, rising to $40,000+ by age 75. Layer CPP (potentially $24,408 per year if deferred to 70) and OAS ($8,724 per year at 65, or $11,868 if deferred to 70), and total income at 71+ can easily exceed $80,000 before any voluntary spending withdrawal. At that income level, OAS clawback begins (2026 threshold: $86,912). At $100,000 income, you are losing $2,086 per year in OAS. The marginal effective tax rate on income in this range, once provincial taxes and OAS clawback are included, can reach 45% or higher.
The solution is to extract RRSP dollars in the years between 60 and 71 when income is lower and tax rates are more favourable. If you retire at 60 and defer CPP to 70, income in your 60s might be quite modest: perhaps $20,000 to $40,000 per year from portfolio withdrawals and TFSA. Withdrawing an additional $40,000 to $60,000 from your RRSP in those years fills the tax brackets at rates of roughly 20 to 30%, depending on province. The same dollars withdrawn at 73 as forced RRIF withdrawals layered on top of CPP and OAS are taxed at 40 to 45%. The lifetime tax saving on a diligent meltdown of a $500,000 RRSP can exceed $80,000.
RRSP withdrawals create taxable income but the after-tax proceeds are yours to reinvest freely. If TFSA contribution room is available, deposit the after-tax amount into a TFSA immediately. The capital then grows tax-free and future withdrawals create no taxable income and do not affect OAS. This is the most tax-efficient place for these dollars. If TFSA room is exhausted, a non-registered account with XGRO or XBAL is the next best option; capital gains and dividends are taxed more favourably than RRSP withdrawals.
For those who have not yet thought carefully about the RRSP meltdown strategy, now is the time. The tools required are a copy of your current RRSP balance, an estimate of your CPP benefit at different ages from My Service Canada Account, and a basic tax bracket table for your province. With those three pieces of information, you can model the next 15 years of income and identify the most efficient withdrawal schedule. For the full RRSP-to-RRIF mechanics and worked examples, see the RRSP to RRIF conversion guide.
Which accounts to draw from first
Account sequencing: which account you draw from, in which order, in which years of retirement, is one of the most impactful decisions a Canadian retiree makes. It is also one of the least discussed.
The general principle for most retirees without a defined benefit pension is as follows. In the early years of retirement, when income is lowest, draw primarily from the RRSP. The tax cost of RRSP withdrawals is minimized when other income sources are absent or minimal. This is the RRSP meltdown in action. In middle retirement years, when CPP and OAS are flowing and RRSP withdrawals are less necessary, supplement income from non-registered accounts first. Realized capital gains in non-registered accounts are taxed at 50% inclusion rate (federal 2026), which is more favourable than the full income inclusion of RRSP withdrawals. In late retirement, preserve TFSA assets for as long as possible. TFSA withdrawals are completely tax-free, create no taxable income, and do not affect OAS clawback, GIS eligibility, or other income-tested benefits. They are also the cleanest vehicle for legacy or estate transfer.
CPP and OAS function as the income floor: they cover basic living expenses and are drawn at whatever age you have chosen. The portfolio fills the gap between government income and your actual budget. The smaller that gap, the less portfolio stress. This is why CPP deferral and RRSP meltdown work together so powerfully: deferring CPP to 70 gives you a larger, permanently indexed income floor. Melting down the RRSP in the low-income years before 70 reduces future tax costs. The portfolio in retirement can then operate at a low, sustainable withdrawal rate because the government income floor is high.
For a complete guide to account sequencing with worked examples at different income levels, see the XEQT drawdown sequencing guide. And for the full framework on converting your portfolio into retirement income, including the 4% rule in a Canadian context, see the XEQT retirement withdrawal strategy.
OAS timing at 65 or 70
OAS is less well known as a deferral opportunity than CPP, but it follows the same logic. Deferring OAS from 65 to 70 increases the benefit by 36%, and that increase is permanent and indexed to inflation for life.
OAS at age 65 (2026 approximate rate for a full 40-year resident): approximately $727 per month. OAS deferred to 70: approximately $989 per month. The break-even compared to taking at 65 is approximately age 83. For a 60-year-old in reasonable health, age 83 is within the normal range of life expectancy. Deferring OAS to 70 is therefore mathematically favourable for the majority of current 60-year-olds who expect to live into their mid-80s.
The practical challenge with deferring OAS is funding the gap between 65 and 70. If CPP is also deferred to 70, the five-year period from 65 to 70 has neither CPP nor OAS flowing. Income in those years must come entirely from the portfolio. This is where the RRSP meltdown strategy intersects with OAS deferral: if RRSP balances are drawn down steadily between 60 and 70 in low-income years, the tax cost of those withdrawals is modest, and the result is a much lower RRIF balance at 71 alongside a much larger OAS and CPP income at 70.
There is an important nuance for those whose RRSP balances are already moderate and whose retirement income is modest. If you expect total retirement income to be below $60,000 per year, deferring OAS to 70 is still potentially advantageous but the case is less clear-cut than for higher-income retirees. The key question is always the same: how long do you expect to live? Those with family history suggesting longevity, no significant health issues, and reasonable retirement income should give serious consideration to deferring both CPP and OAS to 70 and bridging entirely from the portfolio and RRSP.
What the numbers look like
Let us put the whole picture together with a realistic scenario. A 60-year-old with a $600,000 portfolio, contributing $500 per month until retirement at 65, holding XGRO at approximately 5.5% net annual return.
The most important number in this projection is what happens at age 70. Once CPP ($24,408 per year) and OAS ($11,868 per year at the deferred rate) are flowing, total government income is $36,276 per year. Against a $45,000 annual budget, the portfolio only needs to provide $8,724 per year. That is approximately a 1% withdrawal rate on an $860,000 portfolio. At that rate, an 80/20 equity portfolio does not decline. It grows. The 4% rule is entirely irrelevant at that withdrawal rate because the portfolio is not being materially drawn down at all.
This scenario is genuinely achievable for a 60-year-old with a $600,000 portfolio who is willing to defer CPP and OAS to 70 and bridge from portfolio income in the meantime. The math is not aggressive. It does not require exceptional returns. It requires deliberate decisions about CPP timing and RRSP drawdown. Many Canadians are closer to this outcome than they know.
Even a scenario where CPP is taken at 65 (not 70) still results in a portfolio that is not materially threatened. CPP at $1,433 per month plus OAS at $727 per month at 65 is $25,920 per year, leaving the portfolio to cover $19,080 per year: a 2.2% withdrawal rate on $860,000. Still sustainable for 25 to 30 years with high confidence.
At 4% withdrawal rate, the portfolio needed to sustain $45,000 per year is $1,125,000. But that assumes no government income. Once CPP at $24,408 and OAS at $11,868 are included at their 70-deferred rates, the portfolio only needs to generate $8,724 per year. At 4%, that implies a portfolio target of $218,000. The $600,000 portfolio in this scenario is already more than sufficient. Many Canadians are closer to "enough" than they realize once CPP and OAS are properly included in the calculation.
For the full framework on safe withdrawal rates in a Canadian context, including how XEQT and XGRO have historically performed against the 4% rule, see the 4% rule in Canada guide.
Five-year pre-retirement checklist
The five years between 60 and 65 contain a finite set of high-leverage decisions. Here is the complete checklist for executing them deliberately.
This list is deliberately short. There are many other things that could be optimized in retirement planning, but these six actions contain the majority of the financial value. Complete them before retirement and you will arrive at 65 with structural security, a clear income picture, and a portfolio that is positioned to support you for 25 to 30 years without the anxiety that comes from having left these decisions unmade.
If you are working through this list and have additional questions about the transition from accumulation to income, the retirement withdrawal strategy guide covers every phase of in-retirement portfolio management in detail: XEQT retirement withdrawal strategy.
And if you are within one year of retirement rather than five, the next guide in this series covers the final transition decisions: I'm retiring this year. What do I do with my XEQT?
Five years out is the right time to act. Start with the right account.
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