How Much Money Do I Need to Retire?

How Much Money Do I Need to Retire?

We’re all looking for a way to secure a future. It’s common to have dreams of a good retirement, with plenty of money to enjoy life.

However, you can’t expect to just have enough money to live on if you want to be comfortable. You have to plan ahead.

A survey from the Employee Benefits Research Institute indicates that more than half of workers in the United States haven’t done a retirement needs assessment. It wouldn’t be unreasonable to assume that Canadians have similar results. This means that there is a good chance that you might not have figured out how much money you need to retire.

If you don’t know what you need to accomplish with your money, there is no way that you will be able to figure out how much you need in the end, or how much you need to set aside each month to reach your goal.

In order to live a comfortable retirement, you need to ask yourself the following question: how much money do I need to retire?

The answer to that question will depend on a number of factors, including when you plan to retire and how much you will need to spend during retirement to maintain your desired lifestyle. Because of this, knowing what you need to retire in Canada is not a simple answer. However, there are a few simple calculations that might help to give you an idea.

The 4% Rule

The 4% rule states that you can withdraw 4% of your investment portfolio in the first year, then adjust for inflation each year after that and not run out of money for 25-30 years. If you are especially careful, your money can last even longer.

It’s important to note that your portfolio composition does matter. A portfolio of at least 50% bonds at retirement will reduce volatility and increase the odds of this general calculation being reliable.

Another thing to keep in mind is that you can expect some money from the Canada Pension Plan (CPP) and Old Age Security (OAS). While many things can affect the amount you receive each month, including when you start withdrawing from the CPP, as well as OAS clawbacks based on income, a good average for a retired couple is $25,000 per year. Of course, if you have an employer pension you’re even closer to your target retirement income.

Let’s say you want to have an income at retirement of $50,000. With a mortgage paid off and children out of the house, this is actually a pretty comfortable amount. As we’ve discussed, CCP and OAS will likely cover $25,000, leaving you with another $25,000 to fund yourself. You can calculate the 4% rule by taking the amount you need, in this case, $25,000, and dividing it by 4%. The result, using the 4% rule, is that you would need $625,000 at retirement.

Since the 4% rule also takes into account inflation, the only time you ever take out 4% in the first year. There will be enough room for you to increase your withdrawal by the amount of inflation. So in the first year, you may have withdrawn $25,000. However, in the second year inflation may have increased 2%, so you would now take $25,500 out of your investments. You then continue to adjust your withdrawal amount each year with the rise of inflation.

Like any money rule, there are limitations to the 4% rule. While the 4% rule is a simple way to calculate for retirement, it may not work out that way in real life. If you retired in early 2008 and watched your portfolio lose 20-40% by the end of the year, you would then need to adjust to a lower withdrawal rate to continue your retirement withdrawals in a way that allows you to outlive your money.

With market volatility, relying entirely on the 4% rule can be risky, especially if you have a large portion of your portfolio in stocks. This is why you should consider having the majority of your portfolio in bonds at retirement, as it might help reduce the odds of such a large loss. You should also consider building in a buffer. Use the 4% rule as a way to provide a general idea of how much you need to save up, but don’t assume that it is infallible.

The Rule Of 20

The Rule of 20 states that for every $1 of retirement income you want, you will need $20 saved in your retirement portfolio. At first glance, I thought this might just be a “5% rule”. The extra percentage point is likely due to the fact that this rule already accounts for inflation, where the 4% rule only addresses the first year and then adjusts each year for inflation.

The Rule of 20 states that you only need $20 in savings for every $1 of annual retirement income; nowhere does it say you should withdraw 5% each year. So the end result is likely similar to the results you see with the 4% figure. It’s just as a simpler calculation for determining your retirement needs.

Just as with the 4% rule, one key thing to keep in mind is that CPP and OAS will cover a substantial portion of most Canadians’ retirement income. So if your goal is an annual retirement income of $50,000 for you and your spouse, the CPP and OAS payments will get you half way there since you can expect $25,000 for the average retired couple.

Since you have CPP and OAS to help you out, the amount that you actually have to base your retirement savings on (in our scenario) is $25,000 per year. Using The Rule of 20, you calculate that you will need a retirement portfolio of $500,000 in order to retire comfortably.

This amount is hard to compare to the 4% rule calculation since the portfolio has to be larger to allow the same dollar amount to be withdrawn. Let’s look at the comparison another way. Using the 4% rule for $500,000 in savings, you would withdraw only $20,000 in the first year and then increase for inflation each year going forward.

This means that, with the 4% rule, you are withdrawing $5,000 less the first year. By the time you add the $25,000 for OAS and CPP to the $20,000, you only end up with $45,000 a year in income. You either need to adjust your withdrawal or become used to the idea of dipping into your capital more than you had expected. This is another rule that you need to be careful of. Just make sure that you accurately gauge your retirement needs.

The 10% Rule

The 10% rule simply states that you should save 10% of your gross income. Note that it’s gross income, not your net income or paycheque. For example, If you earn $1,500 every 2 weeks and get paid $1,000 after taxes and other deductions, you should save $150 every 2 weeks, not $100.

The issue with the 10% rule is that it only really applies to someone that starts saving in their early twenties and continues until their retirement. If you are over 30, you should consider adjusting this percentage to 15% or 20%.

Using the $150 bi-weekly example above and assuming a 7% rate of return and a retirement age of 65, let’s look at how your age can affect the end result of the 10% rule.

  • Starting age of 25 would have $804,472 after 40 years of saving.
  • Starting age of 35 would have $380,650 after 30 years of saving.
  • Starting age of 45 would have $165,200 after 20 years of saving.

Obviously, it’s not reasonable to simply say “save 10% of your income” without taking age into account. Wondering how much more you would need to save at ages 35 and 45 to make up for the lost time and still come in at the $800,000+ that the 25 year old would have accumulated?

  • Starting age of 35 would need to save $317 bi-weekly, or 21%.
  • Starting age of 45 would need to save $731 bi-weekly, or 49%.

That’s not to say that if you haven’t started saving and you’re 40 years old there is no hope for a comfortable retirement. If 10% is all you are currently able to save, then save 10%. You will still be better off than the many Canadians that save less and you’ll also have the support of the CPP, OAS and any work pension you may have. Plus, once your mortgage is paid off, save the money that would have gone towards your mortgage payment and you can still retire in style!

The Rule Of 72

You can find out how long it should take to double your money with the rule of 72. For this calculation, you divide 72 by your expected return. A 5% return would take 14.4 years to double your money.

Of course with this rule, you’ll need to have a realistic percentage you expect for a return, you can’t always expect double digits in every single year.

You also need to realize that it works better if you have a lump sum to invest. It’s easier to figure out how much money you’ll end up with if you’ve got a large amount of capital to invest for the future.

So, how much money do I need to retire?

Remember that these are just rules of thumb. You don’t want to base your entire strategy on these rules of thumb alone.

Part of what you need to do is figure out how much money you think you will need during retirement, each year. You can use your current expenses as a starting point and try to figure out what your needs will be during retirement.

Keep in mind that there might be tradeoffs. You might no longer have a mortgage payment, but you might travel more. Even though you might think that your expenses will be less during retirement, it doesn’t hurt to assume that your expenses will be similar, or perhaps even a little higher.

Hopefully, these retirement calculations will help you see what you’ll need to save to have the retirement you’re looking forward to. A couple that have worked most of their adult lives and retired at 65 can expect CPP and OAS to pay as much as $30,000 a year.

Many people get discouraged about their retirement needs because they forget about CPP and OAS. Work those programs into your numbers and you’ll likely be pretty pleased with how easy it can be to retire comfortably with just a little planning!


  1. Steve

    The rule of 20 and the 4% rule have been with us for ages. Neither address the true complexities for most individuals. For instance, are your savings inside your RRSP or outside (non-reg/TFSA)? Pension? Do you have a loan you are paying off? Will you take early or late CPP?, do you anticipate a future windfall (selling the cottage, downsizing, inheritance)… and the most important aspect of all:- income tax and it’s effect on the different forms of capital (reg/nonreg/equity/tfsa) as they come in and out of play over time.

    Remember, you don’t need a financial advisor to do this… you have a better handle on this knowledge base. It’s called financial planning, and everyone should be doing it on their own. Financial advisers will direct you as to ‘what’ kind of investments to choose… the financial plan tells you the ‘how much’ and ‘when’ (the scale and timing)

    In summary: Financial plan, DIY. Investment plan, your advisor.

  2. Imran

    Of course, it is important to note that $50,000 at retirement might not be much if you plan to retire in 30 years.

    In “How Long Will It Take To Double My Money? The Rule Of 72“, we can see that “a 3% inflation rate would mean your money will lose half it’s spending power in 24 years”

    Don’t forget to factor that in.

  3. Aaron

    Great piece Tom. One of the things that made me straighten up about my own financial future was reviewing people’s retirement situation when I was 25. Here they were in their 60’s or 80’s, supposedly wealthy, and I could see the fear and uncertainty they were living in. While they were certainly better off than most of their peers, I knew I didn’t want to have those same concerns.

  4. Chris

    Thanks for this Tom. So if I have work take 5% from my bi-weekly pay to go towards my pension (which they match at 5%) and then I take 5% and buy company stocks (which the company matches 3%) can I count that towards to the 10% rule or do the experts recommend that I add 10% to my savings on top of that?


    • Tom Drake

      Chris, looks like Theresa and JoeTaxpayer answered it perfectly.

      18% is a great place to be at. Obviously, the more you can save, the better. But you’re likely saving more than most!

    • Erick

      Just a word of caution on the company stock options program.

      If you have a significant percentage of your savings tied up in company stock, you run the risk of losing both your steady paycheque and a good chunk of your retirement fund if the company fails (ie. Nortel).

      This website gives a good summary:

      • Judith

        I remember well the Nortel fiasco. As much as possible we had clients sell their shares and rebalance their portfolio. Unfortunately not everyone listened. It’s never good to have all your eggs in one basket.

  5. Theresa

    Chris – I would agree Yes.

    I am actually shocked on how many “young people” as in their 30’s and 40’s don’t put any amount in. Out of all the people I know, I only know like one other couple that even put any put any money into RRSP’s.

    I know currently We put in 8% (4% with company matching) But when I work full time I put in a full 10%.

    I just find it hard all this financial stuff. I put in money every month for the kids college funds, and then all the insurance we have including our own disability plan, life insurance, house insurance, etc etc.

    So much money goes towards that “If this happens factor.”.

    Its so confusing, and I just wish we could just simply focus in one area, instead of being pulled in all different directions.

    I know I should put more into the kids college funds. I put in $100 per month for two, and have put in something through out since they were babies. according to experts You should be saving $200 per month per kid, and put away before they are even born.

    I think with retirement I think it matters on what kind of lifestyle you want to have. I know for us, we plan to be snowbirds, and live only in canada for 4 – 6 months of the year. We plan to live in Mexico the other time, cause of the lower cost of living. We also plan to sell our house, and just stay at our cottage for the remainder of time in canada. So for our plan We can get away with actually less. We figure about $36000.00 to $45000.00 ( current price) per year. Currently other couples are living in Mexico for about $1500 $1800 per month.

    So I think when Planning, you need to consider your lifestyle.

    • todd

      Great input – do you have a good reference for mexico retirement – we’re planning the same thing

  6. 2 Cents

    Good information Tom. I would just be careful about assuming a 7% rate of return. That’s probably not a bad benchmark over the long term, but I think it’s important for people to realize it’s not guaranteed.

    In the end, I guess a lot of our retirement planning involves making educated guesses about the future, whether it’s our income level, savings, investment returns, or inflation rates.

  7. JoeTaxpayer

    Chris, that’s great, it looks like 18% to me. The only warning is that if you sell the company stock, it needs to stay in your retirement-targeted account, not get mixed in with general funds. There would come a point where it’s obvious that you are ahead of your goal and either be able to choose between early retirement, reducing savings, or planning on a stepped up lifestyle after you retire. All three are nice to choose from.

  8. Financial Samurai

    Tom, I honestly believe your 10% rule is at least 10-20% too low. We need to be saving 20-30% of our gross income a year in order to comfortably retire, b/c stock market returns and private equity investments are just not enough.

    Or, put it another way, save 15% of your gross income on top of maxing out your retirement savings ie $16,500 for 401k.

    • Tom Drake

      FS, I do agree with that, especially if someone has hit their mid-30s without saving. At the same time, I recommend saving at least 10% since it’s ultimately better than not saving at all.

  9. Ryan

    You bring up one of the important facts about ratios that many people fail to consider – the real answer it that it depends on your situation. 10% is great if you start at age 22 and maintain it throughout your earning years, and the markets do well, and your income continues to rise, and you contribute for 30+ years, and… you get the point.

    The real amount you need to put away will vary depending on the person and the desired income at retirement. I’m a big fan pf putting as much as possible away while you are young so the power of compound interest can have a greater effect. I would rather have over contributed than undercontributed. (of course, this all depends on the ability to invest in the first place – take care of your immediate needs first!).

  10. Perry Torres

    One common rule of thumb states that you will need about 80% of your pre-retirement income during retirement. The rule of thumb might be a good starting point for younger people, but as you approach retirement it is important to take a serious look at how much money you’ll really need. The best way to estimate how much money you’ll need is by looking at your expected income expenses in retirement.

  11. Ethan

    William Bernstein and Jim Otar show pretty carefully that 3% is a more accurate rule of thumb, and even then you have to pay a great deal of attention to what is happening during the first decade of retirement.

  12. JoeTaxpayer

    What method of withdrawal does the 5% author suggest?
    In good times , no problem. It’s creating a method that can survive decades like the 00’s that’s the trick.

  13. Monevator

    Hmm, but presumably if you have most of your money in bonds though, neither 3% nor 4% is going to keep up with inflation over 30 years…

    This sort of problem is why I prefer to target a growing income from dividends, bond coupons, cash interest, property etc, and let the capital take care of itself, rather than risk big drawdowns in bad years by funding withdrawal from selling assets.

    • Ron Sinopoli

      To be able to retire on the 4% rule, you must get the 4% mostly from Multi National Stocks that increase dividends.

  14. Dr Dale Rathgeber

    For the reasons noted above, isn’t it preferrable and safer to continually use a good calculator like the free one at (and to use it as an ongoing monitoring device to ensure that your draw-down rate isn’t excessive?)

    • Melissa

      Just want to thank Tom for this site and info, lots of great input from everyone. Also, want to thank Dr Dale for the free online calculator.. cheers folks

  15. Sustainable PF

    All of the above! Kidding of course.
    The one part of retirement saving I am having issues with is how to evaluate our pensions (government based). Do we forgo bonds (at least for now) due to the stability of the pensions?

    • The Ghost

      Sustainable PF, that’s a very astute questions. In theory, if you have the discipline to evaluate your asset mix on the basis of your entire net worth (i.e. pensions, real estate, probability-weighted contingent assets such as inheritences, etc.), then a pension income stream could be capitalized in order to arrive at its lump-sum value. Essentially, this means applying a “capitalization rate” to the income stream.

      On a government pension that is indexed to inflation, 5% is a good ballpark number to use. So the math goes something like this: $10000 per year in CPP income divided by 5% equals $200,000. It would be reasonable to consider this $200,000 as part of your long-term (i.e. 20+ year) bond holdings. But again, because including this “asset” in your fixed income allocation will likely result in you allocating more to equity in your investment portfolio, you should really only do this if you can stomach the increased volatility that having that additional equity position, whose value you can track by the minute these days, would bring.

  16. krantcents

    Although I do not live in Canada, your question is still relevant. Most of my retirement income will be fixed (social security and pension), I will supplement with various tax deferred and other savings. My theory is to replace my current income adjusted for cost of living.

  17. BeatingTheIndex

    If you’re young ,don’t count on CPP and OAS too much as no one knows where things will be 30-40 years from now. Work out your retirement as if these programs did not exist and you will do just fine by then.

    • Brenda Harris

      I totally agree. Specially now that the USA government is re-thinking the retirement plan. I wouldn’t count on gov help too much.

    • 7y1er

      That might be a potential valid point for OAS but considering workers contribute to CPP via their earnings there would be major hell to pay if they didn’t get CPP benefits. And if I’m not mistaken, the latest actuary assessment in 2010 was that CPP was on solid footing for 75 years.

  18. Jessica07

    Take the final calculation of each of the above, add them together, and viola! That’s what I think I need. Ha-ha. Just kidding. Thanks for putting all these equations in one place! 🙂

  19. Jenn

    Keep in mind all these amounts are pretax. The $30k from CPP/OAS will have tax deducted, and so will your withdrawals from whatever savings you accumulate. If you figure you’ll need $50k/yr NET for expenses in retirement, you’ll need to save more to have that left after taxes.

    In my own case travel will be a big component of an otherwise very frugal retirement budget. Initially I was budgetting for $10k/yr endlessly through a retirement that could last 30-40yrs depending when I start and if I live to 95. Then I decided we were likely to do most of my travelling in the first 10-15yrs and less as time passed. Instead I’ve decided to only assume a very basic annual amount in my regular retirement budget for a couple of car trips to visit family or go away for a weekend. To cover the expensive international travel I hope to do in the early part of retirement, I’m setting up an entirely separate pool of money specifically for travelling. At this point I’m targetting $150k ($15k/yr for 10yrs). I figure we may spend more some years, less others, and maybe won’t travel every year, but it’s money that’s completely separate from our daily budgeting. To accomplish this we’ve decided that the $5k we each put annually into our TFSAs will cover this after ~12yrs of contributions depending on our investment returns. We have 2yrs in and 10 to go on that.

    Using the 4% rule (basically multiply what you need pretax x 25) we’ve already saved what we need for the basics of retirement at 65 plus a little more. We’ll continue to do $10k annually to our TFSAs for travel, and then any extra we have goes toward paying off the mortgage early and building up excess in our RRSPs so we can retire earlier, before CPP & OAS kick in. Those years where we have to fund it completely on our own are a lot harder to fund that the ones after the goverment money starts rolling in. We’re 47/50 now and if all goes according to plan…we hope to retire in December 2020 at 57/60. We may fall short, but if we don’t set a goal to work towards, we’re far less likely to get there. My only regret is that we didn’t get our act together a couple of decades sooner. We could have been retiring or at least shifting to PT now. Hindsight’s always 20/20.

    • Marie at Family Money Values

      @Jenn – saving up to travel in retirement is great, and you are most likely correct to assume that you will want to do it in your early retirement years. I know my aunt and uncle (now in their mid and late eighties) no longer enjoy traveling but they were very keen on it for 50 years.

      Don’t neglect to have adventures before retirement as well!

      • Michele

        Another thing to remember – by the time you hit 75 or 80, travel insurance for international travel becomes either expensive or impossible to get – if you have health issues it’s impossible, but even if you’re healthy it’ll be increasingly expensive.

  20. Doable Finance

    It depends how you have lived before retirement. Times are tough. Many folks are still paying monthly mortgage in retirement.

  21. Barb Friedberg

    Tom, I’m familiar with all of the metrics. The reality is that no matter how much money one has, there is a degree of uncertainty. I’m glad you raised the question and gave some solid recommendations. But there really is no easy answer! There’s definitely a psychological component as well.

    • Cat's Up

      The psychological component is the most important of all and it is the fact that we will spend up to (and often beyond) the income we have, regardless of how much it is.

      The essential problem is the lack of clarity each of us deliberately has about needs vs. wants. For example, too many people think they need to get away to somewhere warm each year, when in fact they just want it.

      How much money do we need for a retirement? Not much, really. How much do we want in our retirement? More than we’ll ever have. It’s that simple.

  22. Wade Pfau

    This blog entry just showed up in my Google Reader, but it seems like maybe it was posted a long time ago.

    I have a couple items on my blog that might be of interest for you. Most studies about sustainable withdrawal rates seem to be about the U.S., but I included a chart of the historical path of sustainable withdrawal rates for Canada at the end of this blog entry:

    Also, I recently finished a paper which says this whole idea of trying to save enough to use a 4% (or 5% in your case) withdrawal rate is not really the right way to think about retirement planning:

    Best wishes, Wade

  23. Jason

    I personally believe the rule of 72 is the proper way to determine how much you need to retire.

  24. Search in finance

    I would only feel safe retiring when i have at least $200,000 saved up 🙂

  25. David T.

    Surely there’s not a 100 per cent way to determine how much money you need to retire, but I think some of these “rules” may give you a clue. In any case, better save some more money if you can – just for sure.

  26. Virata Gamany

    It’s actually that easy isnt it… Just set some aside but many can’t get around doing it…. Even $50 bucks a month goes a long way but that lovely dinner out is just too hard to resist

  27. Soju

    The 10% rule was great way to save money for retirement without compromising your desired lifestyle back in the day when major banks offered GIC’s and Term Deposits with rates of 10% or more. Fast forward to 2011 when banks are only offering 3.5% or less, one has to consider other strategies to save that are not guaranteed such as investment products with fees and commissions that don’t offer any guarantees.

  28. Kevin Yu @ Debt Eye

    I’ve always used the Rule of 72 to figure out how much I need to retire..atleast that’s what I learned in school 🙂

  29. david

    With interest rates so low, and expected to rise, bonds and annuities are out; the stock market is risky except, perhaps in the very long term; real estate is high and falling in most areas; cash loses to inflation – I’m getting .88% in my premium money market fund; precious metals are subject to gut-wrenching fluctuations and are really more of a store of wealth than an investment; and government programs will be subject to erosion by inflation and clawbacks.

    I think this is a hard time to be planning for retirement; I’m pretty sure it’s not just my imagination.

  30. Ross @ Go Be Rich

    All these rules of thumbs are good places to start, but I plan on simply being rich. I know, I know, a little easier said than done, but really, when it comes down to it, I feel as if I’ll always be working on something that will net me some income on the side, plus working on a career that whole time, and having my investments grow all the while. Then again, I really don’t think I’ll ever want to traditionally “retire”, or at least not at the age of 65. But who knows what the future holds.

  31. Ross Taylor

    Thanks for this great article Tom – I featured it in my weekly round up in “the best of the rest”

  32. Money Professor

    Some interesting options, personally i have now planned it on the basis that my requirements for retirement are X. From X i deduct state and private pensions estimated income giving a shortfall of Y and then use the 4% rule to work out what i need to make up the deficit. Once the 4% has been attained each extra X saved allows early retirement.

  33. Tariq @ Yes I Am Cheap

    All of us want to lead a comfortable old age. None of us would like to spend the last phase of our life full of problems and poverty. So we need to plan accordingly and make some savings for the autumn of our Life.

  34. Amanda L Grossman

    I like how you have consolidated these into one post–I’ve known about most of them, but when you put them side by side you can compare much better.

    I am in the US, and my husband and I each have Roth IRAs that we max out, then he has a 401(K) that he puts 3% into to get a company match of 3%, and then I have a pension that I pay into (I put 6% into it and my agency matches that…vested in 5 years and I am almost at 3 years of service).

  35. The Wealthy Canadian

    I think the amount one needs to retire depends a lot on the lifestyle they want to live when they retire, what their investment strategy is, and whether or not they are able to park sufficient funds towards their retirement along the way.

    If you own your home and it’s paid off at a fairly young age, the path to retirement could be a lot quicker depending on how you allocate your hard-earned dollars.

    Some people also have to make changes to their retirement plans along the way. Not everyone will be able to avail of a good company or gov’t pension and finding ways to come out on top will require extra work.

    Nice post

  36. Ron

    Thanks for the numbers Tom, “The Wealthy Canadian” above comments has made a very good point, how you retire depends on lifestyle choices.

    As already noted most Canadian can expect about $30,000.00 in government benefits. All most people need to do is have a part time job that makes them some extra cash. A job also provides a sense of purpose and give you something to do when you retire.

    Retirement is supposed to be a time in a persons life to do different things, but too many people think they just sit at home and do nothing, time to change some lifestyles.

    • Wilson

      If you are retired and plan to live let say 20 years and will make 5% on your money, $30,000 will pay you $1500 per month. Not enough in my opinion.

      • Janus10

        The $30,000 quoted above is an annual income for a couple who have worked and lived in Canada for about 40 years making a good income along the way. It is NOT a one time benefit paid out upon retirement.

  37. Money Varta

    Such a nice post. Very helpful. I do agree with you regarding these rules that these will help to people for sure. But I think that there cannot be any rule that can specify or tell how much to save on an average. I think it is the financial goal that is most important. Depending upon the financial goal you can decide as to much save.

  38. dave oasis

    I really like that 4% rule – I only have about 35 years left until I can retire 🙁

  39. Christian Brustlein

    It largely depends on your current financial assets, as well as their projected evolution in the mid to long term. There is also the question of the lifestyle, what it is like today, and if it can be maintained tomorrow through your savings. Based on those factors, the answer to this question will largely vary.

  40. Pam

    Very informative post! Thanks for the tips. The biggest thing I think is to not be too conservative with your investments when planning for retirement at an early age. Since most really safe investments don’t keep up with inflation, you will have to save more if you don’t want to take any investment risks. Also, it’s important to factor in what you actually want to do in retirement, as others mentioned, this is key in deciding how much you really will need.

  41. all_about_alpha

    did anyone factor in rising medical bills and the risk of having to be in private homes and things like that
    I would be interested to know. I was also following a thread on this on
    If you are interested to get another perspective you can try to read there as well

    but I personnally think it depends big time on the style of life and comfort you want to have and your risk level

    since in planning just the 4% rule you are taking some risk that you would be living as per your life now without any complications.

  42. Paul @ The Frugal Toad

    I keep our finances in Quicken and use the retirement planning software to estimate retirement income and expenses. Hopefully I will retire at 58 and do something else, like blog hopefully! I reduced the social security benefit by 10% due to uncertainty about changes in the entitlement program. Bottom line is we don’t really know what is going to happen and that is why living within your means, and saving are more important now than ever.
    Thanks for your words of wisdom Tom!

  43. niterainbow

    Well if we do have 4% rule and 7% average income….the money will last forever and ever…

    You can call it retirement or financial independence, I would be conservative. Whatever you are spending now – you will need 33 times more.

    So if it is 50,000 a year, you will need 1,650,000 to retire. If think you need less, try to leave on less – prove it before you retire.

  44. Leslie

    Interesting. I never heard of most of those rules before. I find saving for retirement the easy part, it is putting that money into the right investment vehicle now a days that is scary and difficult.

  45. Dan Gale

    Great article, these days it is getting harder and harder unfortunately for younger generations to save for retirement. Solid investment strategies and budgeting are to easy to put aside especially when dealing with higher debt loads.

  46. Andrew

    We really like the 10% rule. Assuming a person has 40 years to retirement, and he would like to reach there faster, he can save even more like 60% to 80%, and start investing the remaining 10%. We know that sounds crazy, but we are in our thirties and have just started our early retirement.

  47. Paul Browne

    Useful information. However is the $50,000.00 per year figure before or after taxes? I am assuming that this figure for those who are mortgage and debt free.

  48. David

    Seems to me all these rules are a little on the stupid side given they take a top down approach! Simple rule add up your expenses over a year! Make sure you can cover them for the expected life expectancy of a man or woman ignore CPP and OAS they become a bonus ie covering extras new car new roof vacation etc! I call it the rule of common sense!

  49. DP

    My wife and I are 35 yrs old, and currently have approx $120K in RSP and pension savings. Currently, when you combine our ongoing RSP and pension savings, we are putting approx $24k away per year. Assuming we continue this for the next 20 years, will this be enough to retire at 55?

  50. Chris

    This is great! Thanks for posting this! I am just turning 24 years old and hyst started to save about 20.5%. My employer puts 9% and I put in 6% into the group RSP, plus I save $200 a month on my own. I am thinking about upping my own savings to make the total 25% because I only make 43K per year.

    What do you think?

  51. Stu L

    Max out your investments in dividend stocks or bonds if you must, to create a cash machine that will require no withdrawal of principal. Skip the growth stocks everbody is pushing cause they usually don’t. grow that is. If you buy a div stock and it goes down a bit, who cares as long as it continues to pay you regularly? Living within your income limit helps as well.

  52. Al

    Good advice, but one thing that I always find with retirement advisors is the fact that they are over optimistic about returns. Please tell me where I can get a 7% return these days.

  53. Uncle E

    I agree with your 4% rule. However, if you are withdrawing money from your RRSP either before, or after you retire, you have to pay tax on that money. If you figure a modest tax rate of 30% then you really have to withdraw roughly $36,000.00 the first year. This throws off your formula. If you adjust your formula for taxes, the amount you would need in your retirement account would be, roughly $900,000.00 This begs the more important question; How much money does an average Canadian family have to put away over 30 years to get to $900,000.00? Even at a healthy compounding rate of 6% that works out to roughly $10,000 a year or $833.00 a month. Is this reasonable for the average Canadian?
    I’m not sure that depending on a single income stream from your RRSP for your retirement is the best approach.

    • jt

      Hey Uncle E, couples living on that little money (especially when split between the two of them) won’t be paying any tax. If even if only one person, they will still only pay a small percentage; nothing even close to 30% – more like single digits.

  54. Al

    Good luck getting a response Antonio. If you want to sleep GIC’s are the only thing.

  55. tomas

    Yeah i think i should be set. I am 24 and i put 10% into my penssion and company puts another 10% so 20% goes to penssion. And samething for my wife she works for the same company so for two of us we put 40% into penssion. and plus 5% into TFSA. yeah lots of young people dont think about that stuff. but i do not wanna work till i am 67 lol

  56. Laura

    I’m very concerned. My fiance is in his early 40’s and has zero savings. In fact he has about 10k in debt. He has a good job that pays a salary of about 80k but has no savings and hasn’t really contributed to any RSP’s. His job also offers a matching program. I have a very stable job and fantastic pension plan and my savings are over 100k. I’m sick over his situation and would appreciate any advice on this dire situation.

  57. SST

    Using the ‘4% Rule’ and expenditure data, the average Canadian retiree household currently has a portfolio of ~$300,000.

    Assuming a two-person household, a future retiree would only need save $275 per month over the course of 45 years (ages 20-65). This could be held in cash or low-risk inflation-indexed securities; no need to put anything into the stock market or mutual funds.

  58. Minecraft Account Generator

    I seriously don’t know generate income wound up in this case, even and so imagined this blog post is superb. I’d not fully grasp whom that you are, nevertheless definitely you wish to some well known writer in case you are not previously! Regards! Minecraft Account Generator

  59. arnold

    It is an interesting article. It shows a use ful strategy. However, $500 k may be too short of a retirement fund for the gen x and y. Make it 1 million instead. It is possible through saving at an early age…

  60. Clayton

    You know I think the amount is subjective. While I have seen many people in my organization staying put for life basically (working full time until they pass away). This might be because they didn’t save or they were just afraid to “take the leap” from something they have been doing for so long. Anyway, there must be enough to factor in the kind of lifestyle you want. For some it will be $500k for others it might mean $5m.

  61. Ed

    One could buy $625k of rental units or a multi-tenant building which should generate roughly 47K/year if done correctly or better if you buy in strong fundamental areas. You put down 20 to 50% conservatively depending on product. Lending institution finances’s the rest.

    Market go up + inflation, rents go up and property go up (increase equity), and sell the dog units. Market go down, rents come down slightly, but more tenants available to rent from you and buy more property. Market go sideways, not much action other than mortgage paydown and buy more property. Enjoy tax advantages.

    Serve your tenants well, they reward you with retirement. Pay the tax man, the bank man, and your wife first before yourself in that order. You will “live long and prosper”.

    When you die, tax man collects payday, and bank reclaim loans. Wife takes the rest and then your progeny. Everybody wins when you’re alive and when you’re dead.

    Not sure what happens if your wife leaves you while you’re still alive, but I follow the rules above so I don’t have to find out.

    Tested and proven methodology for tens of thousand years since the end of nomadism.

    Anyway, that’s my take on retirement. Cheers.

  62. Bryan Jaskolka

    I think all of the up and down with rental units, especially those of that size, are enough to make many investors nauseous. I think we’re tallking typical everyday investors here, not millionaires. For those who want to invest in real estate to pad their retirement savings, investing in private mortgages is a far easier – and less nauseating – way to do it.

  63. SST

    According to StatsCan, the average retiree (65+) has a stash of ~$325,000.

    Your calculation of $625,000 to fuel a $50,000/yr retirement is unrealistic.
    Mathematical reality states 1% of Canadians have that much in investable assets.

    The ‘4% Rule’ is dead and needs to stay so.

  64. Fiscally fit

    Corporate class low cost mutual fund with fees that ae not embedded. Super low cost. Fee is tax deductible in non registered structure. Tclass the monthly income. Not taxable income. Distribution doesn’t change throughout the year. Set it and forget it for some people. Great fit for some. Others not so much. Definitely something for people that don’t like volatility of income but want to take a market based approach. Not for everyone though. Just another tool.

  65. Tahnya Kristina

    Great post Tom. As a financial planner the number one question that I get from clients is “Will my money last in retirement?” The truth is that saving for retirement is a big part of a stable retirement, but so is how you spend your money during retirement. I hope to see you at the Canadian Personal Finance Conference in September.

  66. Bryan Jaskolka

    I agree that using any one percentage is not a good idea. People need to look at what their expenses will be, what their CPP and OAS will be, and how much extra they’ll want to have.

  67. Michael

    I’ll preface my comments by stating that I am a retired (6 years) financial planner, so I’ve been on both sides of the fence. These “you need x-percentage”” articles are entertaining but useless. Only you can figure what you need.

    You start by figuring out you living expenses (fixed plus discretionary) then put them on a timeline. Don’t forget to plug in capital “lumps” which may hit, e.g. trips, a new car or a new roof. Allow for inflation and for the fact that as you age, you will do a little less and buy a little less. You will now have a picture of your outgoings for several years. Now factor in CPP, OAS etc. You can now calculate how much you must draw from you investments.

    Setting up your portfolio to yield dividends rather than interest will give you a tax-favourable income. By testing your taxable income by seeing what adjusting your RRIF draws will do, you can find the best combination of registered v non-registered income. Put as much of your investments into a TFSA as you can, and you will save even more tax. Before retirement, make sure that you and your spouse’s retirement incomes will be about equal.

    This is not rocket science, it just requires some work.

  68. Web Page

    Very interesting info !Perfect just what I was looking for!

  69. Chas Rob

    Most of advice here is based on two incomes..More than 50% of retirees are single.,Maybe two can live as cheap as one..But trust me.It takes a lot more for a single to live alone…However I find that the secret to a secure retirement is to have your accommodation paid in full..Paying rent makes retiring harder..Of course everything really depends on the amount you have managed to save..But circumstances such as illness and or Divorce are a factor also.

  70. Thomas

    “As already noted most Canadian can expect about $30,000.00 in government benefits. ”

    Nonsense. Unfortunately too many financial advisers and writers throw this dud out there as if it were a truism. The average CPP benefit is just a little over $550/month and not the $1038/month maximum.

    • Tom Drake

      The $30,000 mentioned in the article is for a couple, not an individual. Also, don’t forget that OAS is part of that too, not just CPP.

  71. Ben

    An important fact is almost always ignored by those who repeat the widely understood, and accepted, phenomenon that, owing the compounding, the earlier you start, the less you will need to save later.

    Most illustrations almost always use a set number, such as, in the case of this article, $150 bi-weekly.

    The problem is that $150 10 years from now is not worth what $150 is today. This means that the examples distort the power of compounding because while it is certainly important to start earlier, saving $150 now is the same as saving, say, $250 in 10 years. This means that while it is important to save earlier to get higher returns, it is not nearly as difficult as the example in this article implies.

    Using the $150 bi-weekly example above and assuming a 7% rate of return and a retirement age of 65, let’s look at how your age can effect the end result of the 10% rule.

    Starting age of 25 would have $804,472 after 40 years of saving.
    Starting age of 35 would have $380,650 after 30 years of saving.
    Starting age of 45 would have $165,200 after 20 years of saving.

  72. chas

    Own your Shack,,Renting can be a deal breaker ,Good Health is EVERYTHING Take care it Don’t WORRY .If you have good health and a Roof all paid for..Living happily ever after does not cost a lot.

  73. Retire by 65

    Hi Tom – I am currently 55 years old and would like to retire by the time I’m 65. I currently have approx 200K left on my mortgage. I have a minimal amount of retirement money and was wondering how I should allocate my pay cheques in order to still retire in 10 years. My take home amount is $3500/month. Thanks

  74. Catherine

    Thanks for all your advice. The key to a happy retirement is good health, a sense of purpose and of course enough money to support your lifestyle. The later two we have control over by the decisions we make about spending and what we do with our time, but the good health part we sometimes can not control. I read once that the average Canadian spends the last 10 years of their life in failing or poor health. I really like the previous recommendation to start living on what your retirement income will be prior to retirement. If you can happily do that for a sustained period, say 2 or 3 years, then you shouldn’t have a problem. And keep in mind that during that sustained period of 2 or 3 years you may have saved as much as 50%of your net income during this period that could be spent on some great travelling when you do retire!

  75. Rick

    Most people have control over their health too but it is a low priority for them and so they neglect proper nutrition and regular exercise throughout their lives. It all comes back to haunt them when they hit their 50s and 60s.

  76. Marguerite Tennier

    Even though 4% is an ideal maximum to withdraw, doesn’t the actual rule of RRSP is at least 5.2% or so the first year (used to be around 7%) –

  77. Brian Poncelet

    There has been a number of studies suggesting the 4% is full of problems.

  78. Bill Sheridan

    I spent 30 years in the military and retired with a salary of approx $6000 a month. It’s a defined benefit pension so I am happy about that and since I was hurt when I got out of the military the pension was indexed immediately. I never really thought about the pension the first 20 years or so but when planning the future I was pretty happy about it. It may not solve everything but with CPP and OAS I may not have to save much.

  79. Arlene Sancho

    We would like to return to Canada – specifically Montreal where I was born – we are currently retired in Mexico – we are wondering if at age 76 having about 500,000 plus our government pensions will allow us to live comfortably there – we dine out once a week, go for a latte twice a week – here we have been vacationing a lot but realize that would be out in Montreal – is this amount sufficient if we rent for about $1300.00 a month for a condo?

  80. John. D.Cook

    I’m staying with my mother in Ontario for the past 3 years to look after her as she’s having breast cancer and needs someone to take care of. She’s a retired government official with a considerably good pension. Luckily she had medical insurance too. The house is in her name and the home insurance was recently renewed. Now my mom wants to transfer the house to my name. She has been living here for more than 10 years. The premium she pays for the insurance taken from the insurance and financial insurance providers has been discounted looking at her age, years she lived in the same address and including claims-free. Now that it will be transferred to my name, will I be eligible for the same insurance amount or will it change?

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