The older you get, the more important it is to save money, especially if you want to retire by a reasonable age. While everybody’s financial situation is different, most people also accumulate more expenses over time. So, whether you’re paying off your mortgage, car loan or credit card bills, it’s always comforting when you have a nest egg to fall back on.
Not sure how much money you should be saving? Find out how much people your age is saving in Canada.
Average Savings By Age In Canada
The cost of retiring in Canada can be relatively high, especially if you have rent or a mortgage to pay. That’s why it’s good to start making investments during your 20’s and avoid withdrawing large amounts from them until later in life.
This chart shows the average savings of Canadian individuals (individuals not in an economic family) have in varying financial accounts (by age):
|Age Range||Bank Deposits||TFSA||RRSP/RRIF/LIRA/ |
and other pension assets
|35 – 44||$7,163||$3,995||$15,993|
|45 – 54||$8,951||$4,806||$41,998|
|55 – 64||$21,036||$13,199||$91,941|
|65 & Over||$74,328||$38,115||$146,782|
Median Net Worth By Age In Canada
Your net worth is the total amount of assets that you own, minus your liabilities. Assets include real estate, investments, vehicles and retirement savings, while liabilities refer to your unpaid debts. In Canada, the median net worth of Canadian families in 2019 was $329,900. Here’s the median net worth by age in Canada:
|Age Range||Net Worth|
|35 – 44||$234,400|
|45 – 54||$521,100|
|55 – 64||$690,000|
|65 & Over||$543,200|
How Much Money Should You Have Saved At Your Age?
According to financial studies conducted by Canada’s big banks, the exact amount of savings you need to retire depends on how you live afterward. For example, if you retire at 65 and live into your 90’s, you’ll probably have to amass hundreds of thousands of dollars. However, the following table can be used as a benchmark on how much you should have saved according to your age.
|By 30||You should have 1x your salary saved|
|By 40||You should have 3x your salary saved|
|By 50||You should have 6x your salary saved|
|By 60||You should have 8x your salary saved|
|By 67||You should have 10x your salary saved|
Saving In Your 20’s
As mentioned, your 20’s are a good time to begin investing and laying groundwork for healthy finances. That means paying off student loans, building good credit and starting work. Although you’re well under the age of retirement, try saving around 15% of your income or getting a job with a company that offers retirement savings plans.
Saving In Your 30’s
In Canada, people start accumulating much larger expenses once they reach their 30’s. Whether it’s due to their vehicle, their own home or their new family. Despite most of your money potentially being tied up in those areas, you could do yourself a huge favour by investing any spare cash into tax-advantaged accounts like your RRSP and TFSA.
Saving In Your 40’s
By their 40’s, most Canadians have landed a solid form of employment, which is usually necessary considering the amount of debt and household costs they’ve racked up. At this point, buying an affordable home and life insurance, boosting your salary, paying off debt and, of course, budgeting will all become important if you want to retire on time.
Saving In Your 50’s
If you wish to retire by your 60’s or 70’s, your 50’s are definitely the best time to max out your RRSP and TFSA contributions, as well as pay down your remaining debts. Keep a close eye on your investments and get ready to cash out. After that, figure out which retirement benefits you’ll qualify for through work or the federal/provincial government,
Saving In Your 60’s
By retirement age, you’ll ideally have a solid RRSP fund, which must be completely withdrawn or converted to a Registered Retirement Income Fund by age 71. You may also start to consider full or partial retirement. RRSP income is taxable after withdrawal but can offer you a decent nest egg, particularly when combined with CPP and OAS.
How Much Do You Need To Retire In Canada?
In Canada, some financial experts say that you’ll need at least 70% of your annual pre-retirement income for every year of retirement. So, if you make $70,000 a year and lived 30 years after retirement, you’ll theoretically need $1.47 million ($70,000×70%x30 years) to finance your full retirement.
That said, the average amount of money that you actually need to retire comfortably depends on how you live, including personal and financial factors such as:
- Where and when you wish to retire
- Your general lifestyle choices
- Whether you continue working at all
- The other kinds of support you’ll have (familial, governmental, etc.)
- Your remaining expenses (mortgage, commuting costs, children, etc.)
Rule of Thumb For Retirement
Overall, the general rule of thumb for retirement is to start saving as early as possible, even if it’s only a few dollars a month. Experts will also use the “4% rule”, where you withdraw at least 4% of your investment earnings every year, the goal being to make your savings last for 30 years or possibly more. For instance, if you have $500,000, 4% of that would give you $20,000 a year to live on during retirement.
How Much Will You Receive From the Government During Retirement?
When calculating your retirement savings, it’s also a good idea to consider how much you may receive from the government. There are several government support plans you can get to replenish your savings after you retire in Canada:
Old Age Security (OAS)
OAS is a monthly benefit for Canadians aged 65+. Payments are calculated based on an applicant’s age, income and time living in Canada. As of 2022, the maximum OAS payment is $648.67 a month and your income must be under $133,527 a year to qualify.
If your income is below a certain level, your OAS payment may include the Guaranteed Income Supplement (GIS). This offers up to $968.86/month for single, widowed or divorced pensioners making under $19,656/year (figures may vary according to marital status).
Canada Pension Plan (CPP)
CPP is available to Canadians who are 60 or over and is one of the country’s primary sources of income for seniors. It’s a taxable monthly benefit that replaces part of your income after you retire and, if you’re qualified, you can collect it for the rest of your life.
To qualify, you must make at least one valid contribution to the CPP from work you did in Canada or as the result of credits you received from a former spouse or common-law partner after your relationship ended. The maximum CPP payment is $1,253.59/month for retirees aged 65+ and $1,780.10/month for retirees aged 70.
Quebec Pension Plan (QPP)
QPP is compulsory for Quebec residents who are 18+ and earning over $3,500/year from employment. It provides Quebec workers and their families with basic financial support in the event of retirement, death or disability. Since it’s the Quebec version of the CPP, the maximum monthly QPP retirement pension is also $1,253.99 (for 2022).
If you work in Quebec for at least 1 year before retiring, you can qualify for QPP at age 60. The amount you receive depends on your lifetime income and age when you began collecting pension payments. However, if you wait until age 65 to apply, you can qualify for an additional plan that raises your income replacement rate and pensionable salary.
Other Tips For Saving
Retirement is hard to save, so it’s essential to do everything you can to make the process easier in your later years. Don’t worry, because there are plenty of simple and effective ways to build a healthy savings account in Canada, including:
- Get A Bank Account – As soon as you have a job, sign up for a bank account and start depositing your paycheques. Then you can regularly set aside a bit of cash for retirement. Even setting aside 5% – 10% of your income in a TFSA can make a difference.
- Look Into Financial Programs & Investments – Learn which financial products, tax benefits, government support plans and stock options are available to you. If possible, it’s also wise to pick accounts and investments with high interest rates.
- Consider It All – Don’t just focus on the present. Think about your total net worth and the value of your assets. For example, if paying your mortgage means you’re adding equity to your home, that could be more valuable than a savings account.
Now that you know the average savings by age in Canada and the general amount you need for retirement, you can create a savings plan. Saving is such an important part of building your future, so it’s best to get started right away, even if you’re only depositing a few dollars into a TFSA each week. You might have to pay for many costs over the years and saving can help you do that.
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