“How much do you think it would cost to retire in Canada comfortably?”

“Would it surprise you to know the number is $1.7 million?”

You may be familiar with the commercial from Qtrade, the Vancouver-based online investment platform that partners with most of the credit unions in Canada. An interviewer asks a series of people on the streets what they “think it would cost to retire in Canada comfortably.” The respondents range in age from their 20s to around 60 years of age or so. Their responses vary. One young woman said over $100,000 while an early middle-aged man suggested the correct figure was $4 million.


When confronted with the figure of $1.7 million, one woman said she was $1.7 million away from achieving that number. Another said it would probably take her 200 years to save that much. Others were not surprised (see the video below).


Of course, this is all meant to encourage Canadians to start investing with Qtrade. To be clear, Qtrade consistently ranks high in MoneySense’s annual review of online brokers, so they would not be a poor choice. However, the purpose of this blog post is to attempt our own answer to how much it might take to comfortably retire in Canada, regardless of your investment firm.


What are the hurdles to achieving a comfortable retirement?

Lack of Financial Assets

As the woman who said she was $1.7 million away from achieving her goal of having $1.7 million, many Canadians may feel they cannot possibly accumulate the necessary level of assets to retire with any degree of comfort. First, we need to ask how the figure of $1.7 million was arrived at.


Initially, I thought that Qtrade was just picking up the data from a 2023 survey published by the Bank of Montreal. Instead, they pulled data from Statistics Canada’s Canadian Income Survey for the year 2021. It appears they are using the figure for “median market income” for “economic families.”


Median market income excludes government transfers such as the Canada Pension Plan, Old Age Security, Employment Insurance, the Canada Child Benefit, the GST credit, etc.


Economic families “refers to a group of two or more persons who live in the same dwelling and are related to each other by blood, marriage, common-law, adoption or a foster relationship.” That figure was $98,300 in 2021. In other words, they excluded persons living alone.


Evidently, Qtrade rounded up to $100,000 to arrive at their “pre-retirement” income. Using the rule of thumb that in retirement, a household can live on 70% of their pre-retirement income, that gives us $70,000. Finally, they multiplied that figure by 25 years assuming that is the average duration of retirement. That is, if you are 65 years old when you retire and you live to age 90, you will spend 25 years in retirement. If you multiply $70,000 by 25 years, you arrive at $1.75 million (rounded down to $1.7 million).


That’s a rather “back of the envelope” calculation, in my opinion. Nevertheless, let’s work with this seemingly popular figure. It appears many Canadians are not on track to accumulate the necessary assets.


Defined Benefit (DB) Pension Plans are Disappearing

According to MoneySense, in the 1980s, over 80% of employed persons were enrolled in DB pensions, i.e., pensions where the benefit is known. As of 2019, that figure had dropped to 39% and is probably less in 2024. This is the one true “pension” where you know in advance what you can expect at retirement. The employee doesn’t need to decide anything. That the figure is as large as this reflects the significant number of Canadians who work in the public sector or private-sector unionized positions. With these kinds of jobs, accumulating large sums for retirement is not as necessary as a meaningful income stream is promised from the pension.


At retirement, the pension plan administrator arranges with the retiree to start making payouts.


Defined Contribution (DC) Pension Plans are Also Disappearing

The same MoneySense article reported that participation in DC plans had also dropped – to 17% – by 2019. In many ways, the DC pension plan resembles a group RRSP (Registered Retirement Savings Plan). The only thing that is decided is the amount that is contributed to the plan by the employee and the employer. It is often a matching amount. For example, both the employer and the employee contribute 5% of the employee’s earnings.


At retirement, the retiree has the choice to convert the accumulated pension to a Life Income Fund (LIF), an annuity, or a combination of the two. The annuity is a way to turn your DC pension into a kind of DB pension in that the annuitant will receive regular payments for the remainder of his or her life. In the case of the LIF, depending on the provincial (or federal) jurisdiction, there may be an opportunity to “unlock” a portion of the pension assets and move it into a Registered Retirement Income Fund (RRIF). The rationale is that LIFs are designed to last a lifetime, so regulations impose a maximum annual payment to prevent retirees from running out of money prematurely. RRIFs have no maximum, although both have minimums.


Regardless, the decline in both DB and DC pension plans is such that Canadian employees have fewer automated options that help them accumulate funds for retirement.


Registered Retirement Savings Plans (RRSPs)

While Registered Pension Plans (RPPs), whether DB or DC, are declining, to the extent that employers are still offering retirement savings schemes, the Group RRSP seems to be one of the few remaining popular options. The benefit of a Group RRSP is that employers may still contribute a matching portion to their employees’ accounts as they do for RPPs, but at retirement these accounts are not locked in.


Recently, I discovered that a new client contributes to a group RRSP while his employer contributes to a Deferred Profit-Sharing Plan (DPSP). This is a relatively rare plan, and current regulations require that only the employer can make contributions, but it allows for employer flexibility. In a year when profits are lower, the employer has the choice to reduce or eliminate contributions.


Personal and Spousal RRSPs are also an option to save for retirement. However, unlike group plans, these need to be set up and managed by individual Canadians. I was unable to find data on participation in group RRSPs relative to personal or spousal plans, but according to Statistics Canada, the median contribution to all RRSPs in 2022 was $3,910. Approximately 22% of tax filers in Canada reported contributions. However, over 30% of tax filers between the ages of 35 and 64 reported RRSP contributions.


With this figure of $3,910 in mind, let’s return to income. In 2022, the median market income for “economic families and persons not in an economic family” was $65,100. Dividing $3,910 into $65,100, we get a contribution rate of 6%. Given we can contribute up to 18% of earned income, which would bring the contribution figure from $3,910 to $11,718, we can guess the discrepancy reflects one or more of the following: 1. Canadians are contributing a significant portion of their retirement savings via pension plans and, therefore, don’t have much contribution room left for contributing to RRSPs; 2. Canadians are not maximizing their contribution room; and/or 3. Canadians are saving for their retirement by other means, such as in the TFSA or non-registered accounts.


I am going to assume that the main reason for the discrepancy is that Canadians are not maximizing their contribution room. However, let’s look at TFSAs before we move on.


Tax-Free Savings Accounts (TFSAs)

If you are 33 years old or older (born in 1991 or earlier), you have up to $95,000 in contribution room available to contribute to a TFSA since this account type became available in 2009. I will drop this figure down to $75,500, removing the years 2022 to 2024 since the data I have only includes the 2021 contribution year. Nevertheless, the average value of a TFSA in 2021 was $30,444. Even those individuals in the highest measured income cohort ($250,000 and over) had TFSAs with an average value of only $72,476. If you maximized your contributions throughout and earned a modest 2% per year you would have about $86,500. It seems unlikely that Canadians are diverting most of their retirement investments toward TFSAs.


It should be noted that Canadians in lower income tax brackets, typically below $50,000 to $60,000 of taxable income per year, would often do better to prioritize contributions to a TFSA over an RRSP.


Other Means of Saving for Retirement

Given the trend in recent years of ever-increasing home prices, a lot of Canadian households probably regard their homes as their retirement plan, counting on the prospect of selling their homes at retirement, downsizing to something smaller and less expensive, and releasing several hundred thousand dollars to fund their retirement years.


Having said that, house prices don’t always go up, suitable downsizing opportunities may not exist, and putting all of your financial eggs in one basket exposes you to what is called “concentration risk,” the risk of financial loss that comes from insufficient diversification, where too much money is concentrated in too few assets.


That was a long list of retirement savings opportunities that too few of us seem to be taking advantage of. Let’s look at one more item.


The Prospect of Living Too Long

While our public healthcare system seems to be under increasing financial pressure, the general trend has been toward increasing life expectancy. Not that many years ago, it was not unusual for people to die in their 70s. In other words, they often did not live more than a handful of years past their retirement. As the Qtrade calculation suggests, however, we have to consider a retirement that will last 25 years or longer. Our good health could potentially lead to the financial problem known as “longevity risk,” i.e., running out of money before we run out of life. This reason alone makes the challenge of saving for retirement more difficult. Furthermore, as our recent bout of inflation has shown, we cannot count on the Consumer Price Index (CPI) always increasing at a sedate 2% anymore, even though we are a lot closer to that number once again. Some inflation-adjusted sources of income would be beneficial.


The Situation for Retirees Is Not Necessarily That Dire

Let’s continue to assume, with the Qtrade advertisement, that $70,000 is a reasonable after-tax income that we need to achieve. If we assume a two-person household, this figure may not be as challenging as it first appears.


Canada Pension Plan

To begin with, the average monthly CPP payment as of January 2024 was $831.92. Annualized, that works out to $9,983 per person. This figure is adjusted annually by the rate of inflation (CPI).


Old Age Security

Old Age Security (OAS) pays $713.34 per month (as of the April to June 2024 quarter) if you are under age 75 and you have lived in Canada for 40 years or longer since age 18. That works out to $8,560 per year. Monthly income from OAS is adjusted quarterly by the rate of inflation.


Take CPP and OAS and multiply them by two and you have $37,086 per year. You are more than halfway to $70,000.


Tax-Free Savings Account

Before, I had mentioned that the average TFSA balance was $30,444. However, if you are 65 to 69 years old, the average was recorded to be $46,640. If multiplied by two to reflect a couple’s assets, then we are talking about $93,280.


Registered Retirement Income Fund

I don’t have a figure for the average RRSP balance, but regular contributions over a 40-year career can result in a substantial sum.


So, How Much Do You Need to Retire Comfortably?

Remember, the goal was to generate about $70,000 in annual after-tax income. CPP and OAS are taxable forms of income. So is income from an RRSP. Withdrawals from a TFSA are not taxable, however. I’ve discussed some average figures. Let’s move from the average to what is required to reach our goal. Remember, an average annual payment from CPP is $9,983 or $19,966 for a couple. For OAS, the expected annual payment is $8,560 or $17,120 for two people. So, we’ve got $37,086.


Now let’s assume our couple has prioritized their TFSAs. They’ve each contributed $95,000 as of 2024. Assuming a fairly conservative portfolio of 50% global equities and 50% fixed income, they should generate a long-term annual return of about 5%. After adjusting for the MER/management fees of 1% and long-term inflation of 2.1%, that works out to a “real” return of 1.86%. This should result in this couple having about $110,000 in each of their TFSAs. Assuming they want their assets to last for 25 years (using Qtrade’s assumption), with a 1.86% real return they can expect to generate tax-free income of $5,542 each, or $11,084 in total, annually.


Next, we come to the RRSP, which has been converted to a RRIF. To get above $70,000, their accounts need to be worth $300,000 each. Using the same 50/50 investment portfolio will generate an annual RRIF income of $15,115 each or a total of $30,229 (rounded).


Taxes need to be accounted for. The taxable income from the CPP, OAS, and RRIFs works out to $3,767 each, or a total of $7,534. Please note that I used a basic calculator for the combined federal and Ontario tax rates but left out the credits that are available to Canadians above age 65.


Here is the data in table form.



Note that I have excluded any suggestion of participation in an employer-based retirement savings program in which employer contributions were involved. Instead, this imaginary couple did it themselves. This couple, with $220,000 in TFSAs and $600,000 in RRSPs, managed to put together a sustainable retirement.


Anticipating the Future

Despite what Qtrade or BMO suggests, $1.7 million is not necessarily the goal you need to strive for to achieve a comfortable retirement. A “mere” $820,000 seems to do the job quite nicely, less than half of what was projected. This is not to suggest that saving for retirement should be of no concern. I am concerned that there are probably many households that are not on track to save $820,000, let alone $1.7 million, for retirement. To that extent, Qtrade’s message is worth considering. Check out their commercial below.




This is the 252nd blog post for Russ Writes, first published on 2024-06-24


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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions.