For those wondering how much money they will need to retire, the answer can vary greatly. This decision will depend on your ideal retirement lifestyle, current expenses and, of course, the age you want to retire.
In Canada, those looking to save for retirement can consider opening a Registered Retirement Savings Plan (RRSP). This financial account is registered with the federal government and used for retirement purposes.
I’ll go over some of the key factors that will help you determine your RRSP savings goals and guide you through the process of calculating your retirement expenses.
An RRSP is a retirement savings account that can be used for cash savings or as an investment vehicle to hold stocks, bonds, and other long-term investments. RRSPs are tax-advantaged, meaning contributions are usually exempt from being taxed, as long as the funds remain in the plan. Investments will continue to grow until the money is withdrawn.
RRSPs are a great incentive for Canadians to save for retirement, considering contributions are income tax-deductible, meaning they can be claimed as a tax deduction on your income tax return. There are, however, annual limits on how much of this money can be claimed.
Many companies offer employer-sponsored RRSPs, which involves matching a percentage of their employees’ contributions. Individuals may also open their own RRSPs.
After retirement, the RRSP is converted into a Registered Retirement Investment Fund (RRIF), and retirees may begin withdrawing money. These withdrawals are subject to standard income taxes, similar to receiving a weekly or monthly paycheque.
RRSPs are one of the most popular pension plans in Canada, according to a recent study by financial services firm Edward Jones. The study, published in February, found that 51 per cent of Canadians said they planned to contribute to an RRSP in 2023.
How much you’ll need to save in your RRSP to retire comfortably depends on a number of different factors, including:
Another important factor to consider is if you plan on receiving any additional sources of retirement income. This can include an Old Age Security (OAS) pension, a monthly payment granted to those 65 years of age or older, as well as money received as part of your Canada Pension Plan (CPP).
Other sources of income can include pension from an employer, money from personal investments, and passive income from a business.
Some retirees may plan to maintain their pre-retirement lifestyle after they retire. If you’re looking to do the same, you should assume you’ll need to earn a retirement income that is similar to what you’ve been earning to maintain your current cost of living.
Alternatively, some prefer to downsize or upsize after retirement. Each of these choices can affect the amount of money you’ll need to save to reach your retirement goals.
Start by thinking about your ideal retirement lifestyle, and ask yourself:
These are all important questions to consider, as they’ll help you build a picture of your ideal retirement life and the cost to maintain it.
When it comes to calculating your expenses, you should account for the following types of costs.
Fixed expenses are those that generally stay the same each month and include:
Keep in mind that some of these expenses may change over time. However, calculating your monthly cost of living now is a good place to start.
Variable expenses are those that may change on a monthly basis, depending on your habits and the current economy. These can include:
The older you get, the more health-care expenses you may incur. You might require physical therapy to retain your mobility, or receive a diagnosis that needs specialized treatment.
You should also have some extra money saved for emergency expenses.
You’ll also need to consider how long you plan on living in retirement. This is difficult to estimate, because nobody knows exactly how long they will live for. Ultimately, it’s best to plan for a longer period of retirement.
What you can control, to some extent, is how long you will work for. If you want to retire early, you’ll need to have significantly more money saved than somebody retiring at the average retirement age of 64.6. Conversely, you may not need as much money saved if you plan on retiring late.
Assuming that you start saving for retirement at age 25, financial institutions such as Fidelity Investments, which has branches in Canada and the U.S., recommend putting at least 15 per cent of your pre-tax income towards retirement each year.
Additionally, the common budgeting strategy known as the 50/30/20 rule states that you should aim to put 20 per cent of you after-tax income on savings and repaying debt.
While these are great goals to have, not everyone can meet these expectations. Life happens, and there are always expenses you may not be able to plan for. Try your best to save any amount that you can.
For those who continue generating money at age 65 or older, the median after-tax income for senior families was $64,300, according to Statistics Canada data from 2019.
Based on a survey commissioned by the Healthcare of Ontario Pension Plan (HOOPP) earlier this year, more than 75 per cent of Canadians between the ages of 55 and 64 who are not already retired have $100,000 or less in savings. Of those surveyed, 44 per cent claimed that they had less than $5,000 saved.
The survey also revealed that 51 per cent of Canadians under the age of 35 say they are living beyond their means, and not by their choice. Many participants blamed Canada’s high cost of living as well as rising interest rates and elevated housing costs for not being able to meet their savings goals.
The high cost of living also has some Canadians thinking they will need more than $1 million in savings in order to retire, based on a survey published by BMO earlier this year. According to Caroline Dabu, head of wealth distribution and advisory services for BMO Financial Group, the results suggest Canadians are especially concerned about inflation.
If your RRSP savings aren’t where you want them to be, take the time to start planning. Begin by creating a detailed budget, outlining your personal retirement goals and some of the expenses you expect to have after retiring.
With a bit of determination, hard work, and commitment, you should be able to reach your goals!
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.
Lynx Air announced Thursday that it has filed for creditor protection from the Court of King’s Bench of Alberta. The airline said in a release that it will cease operations at midnight, Monday, Feb. 26, with flights continuing until then.
A spacecraft built and flown by Texas-based company Intuitive Machines landed near the moon's south pole on Thursday, the first U.S. touchdown on the lunar surface in more than half a century and the first ever achieved by the private sector.
A Waterloo couple is grateful to be back home after they say they were detained for several hours at a Punta Cana airport, accused of carrying drugs.
A photo of federal Agriculture Minister Lawrence MacAulay eating lobster in Malaysia during an official trip has some people seeing red.
Ten delays, one cancellation, and about 27 hours later, Air Canada travellers trying to jet out of Fort Lauderdale finally made what one of them is calling a 'hellish journey' back to Toronto.
A set of smart vending machines at the University of Waterloo is expected to be removed from campus after students raised privacy concerns about their software.
The judge overseeing the US$355 million civil fraud case has denied Donald Trump’s request to delay the judgment for a month.
Premier David Eby has been clear that speculators are in his crosshairs, and with the 2024 budget his government has announced details of a new 'BC Home Flipping Tax.'
Research has shown that sex trafficking is rampant. For Canadians reading this story this means that within one kilometre from where you’re presently located, a young person is being lured into sex trafficking.
A Waterloo couple is grateful to be back home after they say they were detained for several hours at a Punta Cana airport, accused of carrying drugs.
Premier David Eby has been clear that speculators are in his crosshairs, and with the 2024 budget his government has announced details of a new 'BC Home Flipping Tax.'
The worker killed when a crane's load came crashing down at the massive Oakridge Park development project in South Vancouver this week was a mother of two, sources tell CTV News.
Ten delays, one cancellation, and about 27 hours later, Air Canada travellers trying to jet out of Fort Lauderdale finally made what one of them is calling a 'hellish journey' back to Toronto.
Westlock residents are voting Thursday on a bylaw that would prohibit rainbow crosswalks, a common symbol of support for the LGBTQ2S+ community, and restrict the town to flying only government flags.
There were haunting scenes in Port Coquitlam Wednesday evening, as family and friends of women victimized by serial killer Robert Pickton held a vigil in their memory, at the site of the former pig farm.
The judge overseeing the US$355 million civil fraud case has denied Donald Trump’s request to delay the judgment for a month.
A fire engulfed two residential buildings in the eastern Spanish city of Valencia on Thursday, killing four people and leaving 19 others missing hours after the blaze started, authorities said.
Israeli strikes have killed at least 71 people in southern and central Gaza during roughly the past 24 hours, the territory's health officials said Thursday.
A Black high school student’s monthslong punishment by his Texas school district for refusing to change his hairstyle does not violate a new state law that prohibits race-based hair discrimination, a judge ruled on Thursday.
U.S. authorities have accused another sanitation company of illegally hiring at least two dozen children to clean dangerous meat processing facilities, the latest example of illegal child labour that officials say is increasingly common.
A fire that killed five members of a Missouri family was intentionally set by the mother, police said.
A photo of federal Agriculture Minister Lawrence MacAulay eating lobster in Malaysia during an official trip has some people seeing red.
Justin Trudeau took an unprompted jab at Pierre Poilievre over a Senate porn bill that the prime minister says could usher in a digital ID for adults who want to browse certain websites.
Canada is the only NATO member without a plan or a timeline to reach the alliance's target of spending two per cent of GDP on defence, according to the U.S. ambassador to NATO.
More people are injured by treadmills than any other piece of exercise equipment, according to the U.S. Consumer Product Safety Commission. More than 22,000 treadmill injuries resulted in hospital emergency room visits in 2019.
Amid a growing number of measles outbreaks in the United States and Europe, health officials are warning the public about the possibilities of outbreaks in Canada, with one infectious disease specialist saying even a few measles cases can spark an outbreak.
Alabama's largest hospital paused in vitro fertilization treatments Wednesday as providers and patients across the state scrambled to assess the impact of a court ruling that said frozen embryos are the legal equivalent of children.
A spacecraft built and flown by Texas-based company Intuitive Machines landed near the moon's south pole on Thursday, the first U.S. touchdown on the lunar surface in more than half a century and the first ever achieved by the private sector.
A set of smart vending machines at the University of Waterloo is expected to be removed from campus after students raised privacy concerns about their software.
Putting a wet iPhone in uncooked rice has for years been a popular method to dry it out, but the company now says that's not what users should do.
Sylvester Stallone revealed that he had seven major surgeries after suffering a neck fracture shooting a fight scene with Stone Cold Steve Austin on the set of “The Expendables” in 2010.
Former talk show host Wendy Williams has been diagnosed with progressive aphasia and frontotemporal dementia, according to representatives for Williams.
Toronto native Mae Martin will host the 2024 Canadian Screen Awards.
Lynx Air announced Thursday that it has filed for creditor protection from the Court of King’s Bench of Alberta. The airline said in a release that it will cease operations at midnight, Monday, Feb. 26, with flights continuing until then.
The high cost of groceries isn't just taking a bite out of Canadians' bank accounts, it's also devouring any hope that prices may decrease.
Canada's largest grocer expects this year to be much like the last: customers continuing to seek discounts and deals, leading to more growth at the company’s discount brands and banners, and higher profits.
Bobi the dog, who died last year reportedly at the age of 31, has been stripped of the world’s oldest ever dog title following a review by Guinness World Records (GWR), the organization announced Thursday.
The newest multi-millionaire is advised to sign the back of their winning ticket immediately and head to a retailer to have it validated, so the OLG is notified.
More people are injured by treadmills than any other piece of exercise equipment, according to the U.S. Consumer Product Safety Commission. More than 22,000 treadmill injuries resulted in hospital emergency room visits in 2019.
Mississippi's Republican attorney general sued the Republican state auditor Thursday, saying the auditor is trying to usurp her authority over recovering interest on misspent welfare money from retired NFL quarterback Brett Favre, money that was supposed to help some of the poorest people in the U.S.
He's a runner, a juggler and now Jean-Marc Doiron finds himself joggling, and chasing a world record.
Auston Matthews scored his 50th and 51st goals of the season in his hometown to break a tie as the fastest U.S.-born player to reach 50 and help the Toronto Maple Leafs beat the crumbling Arizona Coyotes 6-3 on Wednesday night.
Toyota is conducting a safety recall to approximately 28,061 SUVs and pickup trucks in Canada involving transmission issues, the company said in a press release on Thursday.
There are additional aspects about buying an EV that you'll need to consider in order to get the best value. The car experts at Edmunds have put together five tips on what you need to know.
Even though authorities are trying to crack down on car thefts in Montreal, three men accused of operating a luxury car theft ring in the city walked free last month because it took too long for their case to go to trial.
The Shopping Trends team is independent of the journalists at CTV News. We may earn a commission when you use our links to shop. Read about us.
