Are Canadians saving enough for retirement?

by | Apr 23, 2024 | Finance and Business

It’s a question on a lot of people’s minds: “How much do I need to retire?”

The answer is, of course, “it depends.” How long will you live? How comfortable do you expect to be? And what kind of care will you require?

The Canadian Institute of Actuaries conducted a survey in partnership with Ipsos to get a clearer picture of how we answer these questions. Here is some of what they discovered.

How much do you need to retire?

The amount is different for everyone, but as a starting point for discussion, actuaries calculated that someone retiring at age 65 would need approximately $900,000 in savings to earn $50,000 in annual retirement income. That’s assuming 2 per cent inflation and a 3.5 per cent post-retirement rate of return for 20 years.

So, how much are we actually saving?

The survey found that more than one in four Canadian retirees have $50,000 or less in savings and investments. About the same number report having saved between $250,000 and $1 million, with only a small fraction having saved more than that.

How long will your savings need to last?

Canadians are living longer than ever. Most Canadians are taking steps to manage their health. This, along with advances in modern medicine, is likely contributing to even longer life expectancy. While this is generally a good thing, it also makes it more likely you will outlive your income in retirement, so you may need to adjust your savings.

What kind of care will you require?

Only a small fraction of us feel like we are likely to need access to a long-term care facility or nursing home in our lifetime. In reality, three-quarters of those who live beyond age 85 will need access to these facilities.

Having a plan is important. For a variety of reasons, the majority of Canadians do not have a financial plan for their retirement. If you are in this group, consider giving it some thought and speaking to a financial planner. Your future self may thank you.

You can learn more about Canada’s actuaries and their areas of expertise at cia-ica.ca

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