Planning and saving for retirement
Determining how much you need for retirement
The amount you need to save depends on how you want to spend your retirement.
To help you plan, consider:
- your age when you retire
- your hobbies
- your travel plans
- if you'll work after you retire
- if you'll have family members to support financially
- whether you’ll have debt to pay, such as a mortgage or a loan
Where you want to live during your retirement also has an impact on how much you’ll need. For example, if you plan on retiring in another country, other rules and regulations may apply. Taxes, public pensions, and medical care may work differently outside of Canada.
Learn more about retiring abroad with this Canadian guide.
Compare your current spending with expected retirement spending
Think about your lifestyle and look at how much you spend now. Then, determine how those expenses may change when you retire.
For example, you may not have work-related expenses. You may decide to spend more on hobbies or travel. You may also decide to live in a smaller home or a condo.
Use the Canadian Retirement Income Calculator to estimate your retirement income.
Decide when you’ll retire
When you want to retire has a big impact on how much you need to save. You'll need to make sure you have enough money to support yourself for the entire length of your retirement.
Once you know when you’ll retire, you’ll have a better idea of how much and how long you have to save.
When to start saving for retirement
It's never too early to start saving for retirement. This may make saving and planning for retirement easier than starting to save later in your career.
Saving early means:
- you may have to save less each month
- your money will have more time to earn a larger amount of compound interest
Example: How much you need to save each month if you start saving for retirement early
Suppose you plan to retire in 20 years. You want to save $100,000 for your retirement. You're earning an annual interest rate of 5% compounded on your savings.
Compare how much you'd have to save each month if you start saving now or in 10 years:
- If you have 20 years to save, you’ll have to save $243 per month to reach your goal
- If you have 10 years to save, you’ll have to save $643 per month to reach your goal
In this example, you’ll earn $18,875 more in interest when you have 20 years to save instead of 10.
Figure 1: How starting to save early means you have to save less each month
Text version - Figure 1: How starting to save early means you have to save less each month
| Year | $243/month | $643/month |
|---|---|---|
| 1 | $2 983,76 | 0 |
| 2 | $6 120,18 | 0 |
| 3 | $9 417,06 | 0 |
| 4 | $12 882,62 | 0 |
| 5 | $16 525,48 | 0 |
| 6 | $20 354,71 | 0 |
| 7 | $24 379,86 | 0 |
| 8 | $28 610,94 | 0 |
| 9 | $33 058,50 | 0 |
| 10 | $37 733,59 | 0 |
| 11 | $42 647,88 | $7 895,30 |
| 12 | $47 813,59 | $16 194,55 |
| 13 | $53 243,58 | $24 918,39 |
| 14 | $58 951,39 | $34 088,57 |
| 15 | $64 951,21 | $43 727,91 |
| 16 | $71 258,00 | $53 860,42 |
| 17 | $77 887,46 | $64 511,32 |
| 18 | $84 856,09 | $75 707,15 |
| 19 | $92 181,25 | $87 475,77 |
| 20 | $99 881,18 | $99 846,51 |
Explore different scenarios before you decide on the right savings plan and timing for your retirement.
Use the Financial Goal Calculator to see how your savings may grow over time.
How inflation may affect your retirement
Inflation is the rising cost of consumer goods and services. In Canada, inflation is measured by the Consumer Price Index (CPI). The CPI measures changes in the price of over 600 consumer goods and services over time.
You can look at the impact of inflation in 2 ways:
- it will increase the cost of goods and services you buy
- it will reduce the buying power of your savings over time
For example, a $100 purchase made in 2013 cost about $129 in 2023.
Example: How inflation affects your retirement
Suppose you plan to retire in 20 years. You want to save what $50,000 buys today. Suppose the inflation rate is 2.5% per year. You’ll need $81,900 in 20 years.
Inflation and pensions plans
You may get money from public pensions when you retire. The Old Age Security (OAS) pension and the Canada Pension Plan (CPP) are protected against inflation. This means as the cost of living goes up, the value of your benefit goes up as well.
Not all employer pensions are protected against inflation. Contact your pension administrator or employer to learn more about your pension.
Try the Old Age Security benefits estimator to find out how much you could receive when you retire.
How to start saving for retirement
Start saving a portion of every paycheque if you can afford it. The earlier you start saving, the longer your money can earn interest and grow.
Using automatic deposits can be a good way to save money. Contact your financial institution to transfer a set amount of your pay automatically in a savings account. Consider increasing the amount of the automatic transfer as your pay increases. Adding a small amount on a regular basis can make a big difference in the long term.
There are various registered plans that may help you save for retirement. Talk to your financial institution to find the right account or plan to help you reach your retirement goals.
Learn more about registered savings plans.
Balancing your current financial priorities
Saving for retirement can be difficult when you have other demands on your money. For example, a mortgage or rent, car payments or student loans. Make a budget to help you figure out how much money you can afford to save for retirement.
Use the Budget Planner to create your budget.
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