.

Start With a Simple Question: How Much Do You Spend Now?

​

The easiest place to begin is to look at your current expenses. Ask yourself:

​

• What do I spend every month?

• How much of that will I still need to spend when I retire?

• Will any expenses increase or decrease?

 

Example:

​

• You might spend less on commuting, clothes for work, or mortgage payments (if your house is paid off).

• But you might spend more on healthcare, travel, or hobbies.

​

The 70% Rule: A General Guideline

​

A common rule of thumb is that you’ll need about 70% to 80% of your pre-retirement income to maintain your current lifestyle in retirement.

For example:

​

• If you currently earn $70,000 per year, you’ll need around $49,000 to $56,000 per year in retirement.

This number is a good starting point—but keep in mind, it’s just a guideline.

 

Step 1: Estimate Your Annual Retirement Spending

​

Make a realistic budget based on your future lifestyle. Here’s what to include:

​

• Housing (rent, maintenance, property tax)

• Food and groceries

• Utilities and bills

• Transportation (car, public transit, insurance)

• Healthcare

• Travel and hobbies

• Gifts and entertainment

• Insurance and long-term care

 

Add everything up to get your estimated annual spending in retirement.

 

Step 2: Estimate How Long You'll Be Retired

​

Nobody knows exactly how long they’ll live, but it’s good to plan for a long life to make sure you don’t outlive your money.

Most people retire between age 60 and 70. Life expectancy in Canada is around 82 years, but many people live into their 90s.

Planning for 25 to 30 years of retirement is a safe and smart move.

 

Step 3: Multiply to Find the Total

​

Let’s say:

​

• You estimate you’ll need $55,000 per year

• You expect to live 25 years in retirement

 

That means you’ll need roughly:

$55,000 x 25 years = $1,375,000

 

That’s how much you’d need in total retirement savings if you were paying all your retirement costs out of pocket.

​

But Don’t Panic — You Won’t Need to Save All of That

​

Luckily, most Canadians don’t need to save the full amount themselves. That’s because you may have multiple sources of retirement income, including:

​

• Canada Pension Plan (CPP)

• Old Age Security (OAS)

• Workplace pensions

• Personal savings and investments (RRSPs, TFSAs, etc.)

• Rental income or business income

 

Average Monthly Income from Government Programs

​

Let’s take a quick look at what you might receive from the government:

​

• CPP (Canada Pension Plan): Average is about $770/month (if you retire at 65), max is around $1,364/month (2024)

• OAS (Old Age Security): Around $713/month (2024) if you qualify for the full amount

 

That’s roughly $1,483/month or $17,796/year, assuming you receive average benefits from both.

This can reduce the amount you need to withdraw from your savings every year.

 

Use the 4% Rule to Estimate Your Retirement Goal

​

A common retirement planning tool is the 4% Rule. It suggests you can withdraw 4% of your retirement savings per year, without running out of money over a 30-year retirement.

​

To use this rule:

​

1. Figure out how much annual income you’ll need from savings (after factoring in CPP, OAS, etc.)

2. Multiply that number by 25 (the inverse of 4%)

 

Example:

 

You need $55,000 per year, and you’ll get $18,000/year from CPP and OAS. That leaves:

 

$37,000/year needed from savings

 

Now multiply:

$37,000 x 25 = $925,000

 

That’s your retirement savings target using the 4% rule.

 

How to Reach That Goal: Saving Over Time

​

Saving for retirement isn’t about hitting a giant number overnight. It’s about consistently investing over time and letting compound growth work its magic.

 

Here’s an example based on someone starting at age 30:

 

Age You Start Saving Monthly Investment Needed to Reach $1M by 65 (7% return)

​

Age 25 $405/month

Age 30 $610/month

Age 35 $910/month

Age 40 $1,365/month

​

The earlier you start, the less you need to save each month.

 

Where Should You Save for Retirement?

​

Here are the most common retirement accounts for Canadians:

​

• RRSP (Registered Retirement Savings Plan): Contributions are tax-deductible, grows tax-deferred

• TFSA (Tax-Free Savings Account): No tax deduction, but growth and withdrawals are tax-free

• LIRA (Locked-In Retirement Account): For transferring pensions from past employers

• Workplace pensions or group RRSPs

• Non-registered investment accounts if you’ve maxed out others

 

Use a mix of these to diversify your retirement income and lower your tax burden in retirement.

 

Tips to Stay on Track

​

• Start early: Time is your biggest ally thanks to compound interest

• Contribute regularly: Automate your savings so you stay consistent

• Increase your savings over time: Raise contributions as your income grows

• Review your plan annually: Adjust as your goals or life situation changes

• Work with a financial advisor: For help with investment strategy and retirement planning

 

Final Thoughts: You Can Do This

​

Figuring out how much you’ll need to retire may seem intimidating at first—but once you break it down, it becomes much more manageable.

The key is to:

​

• Estimate your future lifestyle and expenses

• Use tools like the 70% rule and 4% rule

• Factor in government benefits

• Start saving as early as you can

 

Everyone’s retirement journey is different. Some want to travel the world, others want to stay close to home and enjoy time with family. Whatever your dream is, the right plan will help you get there.