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Saving for retirement is not a one size fits all deal. You need a unique plan to fit your goals and lifestyle, not some sales pitch from big mutual fund!

To be honest, I know I am saving for retirement because I do not want to continue working full-time slaving away and being in the rat race, but I do not know the exact number that I will need for retirement.  I know it’s somewhere up there, though.  Thought it would be nice to write up a post to figure this out together.

According to The Globe and Mail, Canadians believe they will need an average of $908,000 in retirement savings in order to live comfortably.  In Alberta and British Columbia, people feel that they will need at least one million dollars in retirement savings in order to live comfortably as well.  About 1 in 3 Canadians do not feel that they can meet this expectation.

Let’s Look at the Average

Money Sense has a handy chart that tells you at a quick glance how much you will probably need to have in your portfolio in order to retire comfortably depending on what kind of retirement you want to live.  The only limitation with this chart is that it only shows retirement at age 65 (I would personally like to retire earlier than that, or at least be able to just work part-time instead of full-time at an earlier age, let’s say in 10-15 years).

For an average single person who wants to retire at age 65, one would need about $875,000 in retirement savings.  Upper middle class entails international travel, a new car every 8 years or so, and a comfortable retirement.

What Factors Affect Your “Number”

There are numerous factors that can affect your number.  For example, whether or not you have children or not.  Whether you own your home or whether you plan to rent.  Whether you have a defined benefit pension or a pension at all and whether you qualify for government retirement benefits.

Retirement Calculators

There are a plethora of retirement calculators out there.  One that I thought was quite easy to use and not overwhelming was the retirement calculator by TD Canada Trust.  It looks at how much income you need during your retirement, what your current savings levels are, when you plan to retire and for how many years (though hard to predict because we never know when we are going to croak), and the average rate of return on your current investments.  The number I got was similar to the one that I looked at on the MoneySense chart.

Other retirement calculators include those from our friends at the Government of Canada, the Retirement Income Calculator.

Another good one is from one of my favourite websites, taxtips.ca The Annual Retirement Income Calculator.  They also recommend that you live off your dividends and build enough of a dividend portfolio that allows you to do this.  The twist with this calculator is that it tells you how much annual income your portfolio will provide before the money runs dry.  Kind of like looking at it from another angle.

What I am Going to Do

Since all of these calculators and charts pretty much confirmed the amount that I will need for retirement and the number in my head is pretty much similar to what I have been aiming for and is an easy concrete number to aim for, I have decided and reconfirmed that the amount that I will need for retirement individually is around $875,000 to one million dollars ($1,000,000 for you visual readers out there).  That does seem like quite the number, but if I want to retire comfortably and reach financial independence this is what I am going to have to do.  However, if I work part-time (which is what I foresee myself doing but perhaps until I am in my late 50’s or early 60’s) then this number changes of course and eases up a bit.

I am about 1/3 of the way there (though we are looking at my net worth instead of my retirement savings which is technically cheating) currently.  I have about 10-15 more years to try and achieve this goal and this goal might seem less attainable if (hopefully when) I have children.  However, at least I have a number available in my head and something to shoot for.

One of my favourite quotes growing up was  “Shoot for the moon. Even if you miss, you’ll land among the stars.” by Vincent Norman Peale

In order to climb this financial mountain (it’s not Everest… but maybe like Kilimanjaro?) I need a plan that says more than just “save a bunch of money”.  I’ll need my money to work for me.  That’s why you can look through our archives and find articles that look at various types of investing on various types of platforms.  We have everything from reviews on Canada’s discount brokerages, to more automated solutions that allow you to be a little more hands-off with your investing such as this review on Canada’s robo advisors, including my top current investment choice that is featured in-depth in our Wealthsimple review.  To throw one more cool quote at you: “A goal without a plan is just a wish.”  Don’t put your head in the sand when it comes to understanding the reality of your retirement or making a plan about how to get there!

Readers, do you know how much you need to save for retirement?  Have you opened a Questrade account (or some other investment platform) yet?  

Article comments

MakesNoSense says:

What’s that saying about “anyone who represents them self in court has a fool for a lawyer and an even bigger fool for a client”? Anyone looking for this kind of advice from someone who hasn’t even started to live and save by their own recommendations, is probably just a dreamer. There is no magic number. As with the rest of your life, you will live within (or just outside) your means, as most people already do. Those with good pensions will live to the means the pensions provide. Those that save on their own will spend like they always do and draw down on the principle.

Just the fact stated here that a survey has found Canadians believe they will need $900,000 to $1,000,000 in retirement savings AND only 1 in 3 don’t think they can meet that goal, tells you all you need to know about the accuracy of this article. Fewer than 10% of people out there will even have the means to save $1,000,000 in their lifetime, and the number that actually would save that amount is less than 2%.

My numbers are completely made up and are probably way overstated. But then again, if we ever go through another period of high inflation like the 1970s and 80s, it won’t matter one iota what people saved or didn’t save either. Living on a fixed income is always going to be a huge gamble. Owning the place where you live is, and will always be, your best hedge against inflation.

BeachBoy says:

Net worth is not retirement savings. Especially for the house value. You can downsize yes, but nothing says you’ll sell and downsize easily or at all.

Leigh says:

It’s so hard to know exactly how much I’ll need in retirement since it’s so far away. Right now I’m shooting for a paid off condo and around $745,000 in investments, so around $1.2M in net worth. I’ll re-evaluate as I get closer to that number, but as you said, it gives me something to shoot for in the meantime!