Planning for retirement can feel overwhelming, especially when trying to figure out how much you really need to retire comfortably. While there’s no single answer for everyone, a few key benchmarks can help guide you toward your goal.
General Guidelines and Income Needs
Experts often recommend that retirees aim for 60-70% of their pre-retirement income to maintain their lifestyle, but varies depending on what you plan to do in retirement. According to the Financial Consumer Agency of Canada, a typical Canadian household spends about $67,000 annually, which would mean needing just under $50,000 per year in retirement spending (after-tax) 1. Of course, this number varies dramatically based on personal circumstances, such as desired lifestyle and location.
In practice, many Canadians will rely on a combination of government benefits, savings, and pensions. The average after-tax income for seniors is around $74,200 for couples and $33,600 for individuals. 2
Government programs like the Canada Pension Plan (CPP), Old Age Security (OAS), and the Guaranteed Income Supplement (GIS) play a critical role in providing income. For example, in 2024, the maximum CPP payment at 65 is $16,375/yr while maximum OAS payment for individuals aged 65 are $8,560/yr.
However, these government benefits alone often won’t cover all retirement expenses, and the benefit you actually receive depends on the age you begin the pensions. The decision on when to start CPP and OAS is one of the biggest options to evaluate in your retirement plan, and we discuss some of those options here: https://mingassociates.com/cpp-oas-options/
Additional Considerations
Rising expenses (inflation), longevity, and healthcare costs are other important factors. To get a clearer idea of how much you’ll need, start by calculating your expected expenses and factoring in inflation—historically, Canada’s inflation rate averages around 2% per year… meaning that if you want to maintain a certain standard of living, you’ll need to adjust your savings/investments accordingly.
While the Canadian healthcare system provides universal coverage, seniors may face significant out-of-pocket expenses for prescription drugs, dental care, and home support services. The Financial Consumer Agency of Canada estimates that healthcare costs for seniors can range between $5,000 and $10,000 annually
For an example of how far money will take you in retirement – click here.
Ultimately, the key to retiring comfortably in Canada is planning ahead and staying informed. When working with our financial planners, they’ll take time to review all areas of retirement planning and educate you on the options available to reach your goals. You can take the necessary steps to achieve a secure and fulfilling retirement by starting with an introduction call to learn more.
Sources:
