How Much Do You Need to Retire Comfortably in Canada?



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Retire comfortably

Retirement, some loathe it, some look forward to it, while others are just indifferent.  Whichever category you fall, we all agree it is an inevitable part of life. What we don’t know is just how much money would be sufficient for us to retire comfortably after our active years.

Retirement planning is a crucial part of your future. According to research conducted by the CIBC, the average Canadian wishes to retire with at least CA$750,000. While this figure may seem like a huge sum to some people, others may consider it too little.

Retirement is a personal decision, by every ramification. We all have different preferences, goals, incomes, dependents, etc. among other factors that need to be considered before reaching a round figure that could be sufficient for a satisfactory retirement. In this article, we will try to guide you through this decision.

How Much Do You Need To Retire Comfortably In Canada?

Comfort in retirement is relative. Some people wish to retire into a countryside home with a few cows, greens, and a white picket fence.

Others wish to move to Vegas to live the life or disappear over to a beach in faraway Bahamas, Ibiza, or Bora Bora.  In retirement, there are no rules. But your desires and lifestyles do have cost implications.

To accurately estimate how much would be required for you to retire comfortably, you have to first define your own comfort.

However, if you are still unsure of what your desired lifestyle in retirement would be, Experts recommend the 70% rule. This rule states that you should earmark 70% of your current annual income as your annual expense rate in retirement.

This is based on the premise that your expenses will drop dramatically when you are older. For instance, you may spend less on daily commute and clothing.

Average Retirement Expenses in Canada

After having outlined the expenses above, we can then proceed to work out the average amount that the average Canadian would require in retirement.

Average Annual Cost of Living (rent not included) + Average Annual Health Expenses x (Average Life Expectancy – Average Retirement Age)

$20,000 + $5000 x (82-65) = $425,000

This means that at minimum, the average Canadian will need $425,000 to retire comfortably.

It is important to note that your estimates can be far different from this. The computation above is only to give you a framework to work out your own potential retirement expenses.

Factors that affect your Retirement Expenses in Canada

To work out how much you would need to retire in Canada, there is a host of questions that you must first ask yourself. These are the factors that will impact how much money you would spend while you are retired

  • Location Cost of Living

Cost of living is a key economic factor that differs from one province to another. It involves the average cost of the basic necessities of life in a given location.

Food costs, Rent, and Transportation. If in your retirement, you wish to reside in cities like Vancouver or Toronto, your monthly basic expenses will be much higher than a person who lives in Newfoundland.

  • Desired Retirement Age

The retirement age proposed by the Canadian Government is 65 years. However, many people may desire to retire much earlier or later. The earlier you choose to retire, the more money you would need to set aside during your active days.

  • Underlying Health Issues

One of the main components of retirement expenses is health care. As humans grow older, sometimes our health appears to be much more fragile than it was in our youthful days.

Advancement in medical science has made it possible for us to predict the likelihood of certain infirmities, decades before they rear their ugly head.

While making your retirement plan, it is wise to visit the hospital for a random check. Look into your family history, lifestyle, job hazards. All of these put you at risk of developing varying levels of health issues in the future.

If you don’t make adequate preparation, health expenses can quickly eat deep into your savings and you’ll be left in limbo.

So yes in this case, strange as it may sound, you will be taking finance lessons from a doctor.

Average Annual Health Care Cost for Canadians:

According to a survey by RBC Wealth Management, Canadian retirees spend between CA$2,700 to $5,000 on health care annually.

  • Dependents

The number of people who could potentially depend on you for their livelihood after you have retired. For instance, if you have kids in your late 50s, aged parents, or siblings that you would need to care for after you have retired, you need to make preparations for these in your retirement plans.

The average annual cost of raising a child in Canada is between $10,000 to $15,000 annually.

  • Government Support

In some countries, the governments enact social security policies to support retirees and senior citizens. While making a retirement plan, you need to have a look at your local laws and policies that could potentially offer you some sort of support when you retire.

The Canadian Government offers public pension plans aimed at income security, including Old Age Security (OAS), Guaranteed Income Supplement (GIS), and Canadian Pension Plan (CPP). Veterans Affairs Canada extends a wide range of facilities and benefits to eligible Veterans and their families and caregivers.

  • Employer Support

Some employers do a lot to support their employees ahead of their retirement and beyond. While drawing up a retirement plan, you should do some research about your employer’s retiree support program.

If you are negotiating a new job, your retirement plan should be one of the times you should include in your terms.

Examples of Employer Retirement Support Programs in Canada are RRSP, Pension Plans, Gratuity and Severance Payments.

  • Personal Debts or Loans

While making your retirement plan, beyond your basic expenses, you also need to consider levels of debt, or loan repayments that you would potentially have upon retirement. A typical example of this is your mortgage.

Retirement Savings Techniques and Rules

Having understood the various costs that you may encounter when you retire, the next step is to come up with a plan to build up the estimated amount. Finance experts around the world have recommended certain approaches that may help you hit your target.

Rule of 10%

 This rule, experts recommend that people who do not have a stable, salaried source of income should save up 10% of every paycheck towards retirement.

Rule of $20

This rule states that when you hit your 40’s you should begin to increase your retirement savings. It is assumed that in your 40’s you would have attained the peak in your chosen career, and be earning your highest incomes. At that point, you should double your savings and start setting aside 20% of what you earn.

x25 rule

This rule recommends that you should prepare ahead for 25 years of retirement. We are all unsure of the day that we die, however, most people want to live for as long as possible.

Experts come up with this rule to remove that ambiguity. After estimating your desired annual retirement spending, you should multiply that figure by 25 to arrive at your target retirement savings.

4% Rule

This rule recommends that all retirees should only withdraw 4% of their total retirement fund annually.  Active workers can also use this rule to plan how much they would need to save up to retire comfortably.

Retirement Savings Plans in Canada

Preparing for retirement is largely personal, however, there are a lot of programs and schemes designed by the government and financial institutions to help make retirement planning very attractive and accessible to all.

Because retirement seems far away in the distant future, some people feel reluctant to make decent contributions. Others feel that there is always time to do it later. These schemes highlighted below are designed to help us make adequate preparations for retirement.

RRSP: Registered Retirement Savings Plan. It was developed by the Canadian Government in 1957 to encourage Canadians to make regular contributions towards their retirements. The RRSP provides benefits such as Tax savings as well as a 4% Interest rate on the amounts contributed.

To know more about the RRSP in Canada you can click here:

Retirement Savings Tips  

  • Expand income capacity: Switch jobs, learn new skills, Professional Certifications, Switch Careers
  • Take advantage of tax-sheltered accounts
  • Start early
  • Live & Eat Healthy
  • Pick out banks with the highest Interest rate on Savings
  • Invest > Savings: Conservative inv. Blue-chip stock, Gold. Government Bonds, Mutual Funds.
  • Relocate to a province with a lower cost of living, lower taxes.

Retirement Living Tips

  • Stay active
  • Stay in touch with your friends, co-workers, and most importantly family
  • Try out new hobbies
  • Join groups. There are a lot of social networking groups for retirees. It can be more interesting than you think. Check within your locality, or even on social media.
  • Put your health first to save on expensive medical bills. Change your eating, drinking, or smoking habits. Exercise regularly and talk to your doctor often.
  • Think of ways to earn money in retirement: Passive Investment Income, Annuities, Speaking Events, teaching etc.
  • Ask for help: If you run into traffic at any point during your retirement, do not hesitate to ask for help. Talk to your neighbors, relatives. There are also a lot of support groups out there that you can ask for help.


Even for people in their 50’s retirement does sound like something that would occur in the distant future. Saving up towards it requires a lot of discipline and expertise.

Remember when you couldn’t wait to turn 18? Well, look at you now. Retirement will be here sooner than you think, your future is in your own hands. Start saving. And start now!

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Avid researcher, freelance writer, and personal finance enthusiast passionate about financial education and literacy.

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Kareena Maya

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Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.

Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.