FP Canada 2026 Projection Assumption Guidelines: Inflation, Returns, and Longevity Explained

Investment Returns Are a Starting Point, Not a Forecast

The equity return assumptions will likely attract the most attention. FP Canada suggests long-term returns of 6.3% for Canadian equities, 6.4% for U.S. equities, 6.6% for international developed equities, and 7.5% for emerging markets. These are much lower than recent stock market returns. They are not meant to predict future market performance. They are reasonable long-term planning assumptions that allow planners to build projections using a consistent framework.

For perspective, a 6.3% Canadian equity return assumption combined with 2.1% inflation implies a real return of roughly 4.2% before fees and taxes.

Taxes are another important consideration. The impact of that 6.3% return can be very different in a registered retirement plan (RRSP), tax-free savings account (TFSA), or taxable non-registered account. Retirement tax planning can have a significant impact on sustainable spending in retirement.

A retirement plan should not depend on getting every assumption exactly right. Planning is based on a point in time and should be revisited as investment returns, inflation, spending, taxes, and personal circumstances evolve.

Inflation Still Matters More Than Many People Think

The inflation assumption for 2026 is 2.1%. That may seem modest compared to the inflation that Canadians have experienced in recent years, but even relatively low inflation can have a significant impact over several decades – especially for conservative investors or pensioners whose payments are not indexed or adjusted for inflation.

Inflation affects more than the cost of groceries. It influences:

• Retirement spending projections
• CPP and OAS benefits
• Tax brackets and tax credits
• Salary growth
• Future purchasing power

For retirees, inflation is one of the reasons spending needs tend to rise over time, even when lifestyles do not change dramatically. This is one reason retirement calculations can be difficult to do on your own

Inflation is also why retirement planning is about more than generating income today. That income needs to maintain purchasing power for years or decades into the future.

Longevity Can Be Just as Important as Investment Returns

The 2026 guidelines also include updated mortality assumptions. Living longer is generally good news. But it also means retirement savings may need to last longer.

When building retirement projections, planners should consider not only average life expectancy but also the possibility that one member of a couple lives well into their 90s.

In practice, longevity is often one of the most important variables in retirement planning. Decisions about when to start CPP, when to convert RRSPs to RRIFs, and how quickly to draw down assets can all be influenced by expected lifespan. If only we knew how long we would live, it would make retirement planning much easier.

New Guidance on Housing Costs

One new element in the 2026 guidelines is a shelter cost growth factor of 3.1%. This is a shelter cost assumption for long-term planning purposes, not a forecast for home prices, particularly in the short term.

Housing can have an outsized impact on retirement planning, whether someone owns a home, a rental property, rents, plans to downsize, or expects to relocate in retirement. As a result, planners may need to adjust this input based on a client's circumstances and future housing plans.

For some retirees, housing decisions can have a bigger impact on retirement sustainability than differences in projected investment returns.

Using the Guidelines in Practice

The FP Canada guidelines are intended to be a starting point, not a substitute for professional judgment. There may be situations where a planner uses different inputs based on a client's investments, retirement goals, business interests, or other unique circumstances. What is important is understanding why the assumptions differ and explaining the impact on the projected results.

The most useful financial projections are often those that test multiple scenarios. If investment returns are lower than expected, what happens? What if inflation is higher? What if retirement starts earlier? What if spending increases?

The goal of retirement planning is not to predict the future perfectly. It is to make better decisions today: when to retire, how much to spend, when to start government benefits, how to manage taxes, and how to adjust when circumstances change.