What is the average saving by age in Canada?

It feels like everyone out there giving financial advice is beating the same drum: “save your money!”

“Start early!”

“You’re not investing enough!”

“Stop eating avocados so you won’t retire in poverty!”

Yeesh!

Don’t get me wrong – saving money is important. But it’s also difficult thanks to wage stagnation, long-term inflation and the extremely high cost of housing. But how much should you really be saving? Are you really that far behind?

How much do I need to have saved at my age?

The answer to how much you should have saved depends on how you want to live in retirement. 

A BMO wealth management study from 2015 found that retired Canadians spend an average of $28,800 per year. Adjusted for inflation, that works out to $32,000 a year in 2021. That means if you plan to retire at age 65 and live until you are 90, you need to have about $800,000 on hand if you want to retire today (*1).

Now comes the upsetting math about compound interest. 

The longer your money is invested, the more it can earn. If you start saving for retirement in your 20s, the amount needed looks similar to a car payment. If you start around the time you’re 50, it’s more like a mortgage payment. If you wait much longer than that, you might not be able to reach your goal.

Assuming you’re just getting started and invest your money with an average annual return of 6%, here’s how much you need to put away every month to get to $800,000 by age 65.

How much you should be saving for retirement by age

 

Age today	Monthly saving
60	$11,826
55	$5,068
50	$2,864
45	$1,812
40	$1,215
35	$843
30	$598
25	$431
20	$313
18	$277

If you don’t want to put that much money toward savings, here’s how much you already need to have on hand in order to meet your goal, organized by the amount you want to save each month(*2):

Age today	Desired monthly saving amount
	$250	$500	$1,000	$1,500	$2,000
60	$585,169	$572,532	$547,258	$521,984	$496,710
55	$424,636	$402,555	$358,395	$314,234	$270,074
50	$304,675	$275,539	$217,265	$158,992	$100,718
45	$215,034	$180,624	$111,805	$42,985
40	$148,049	$109,699	$32,999
35	$97,994	$56,699
30	$60,589	$17,095
25	$32,639
20	$11,753
18	$4,960

According to a study by the National Institute on Retirement Security in the US, 66% of working millennials have no retirement savings. Let’s change that. 

If at age 20, you invest $400 per month and earn 8% in the stock market on average per year, you’ll have $2 million at age 65.  If you start at 35, you’ll have $587,000 at age 65. Invest tip: start early. Putting money into a savings account is not investing, it’s actually the opposite because inflation will likely devalue your buying power. 

With that in mind, another way to look at this is your savings rate, in other words, the percentage of money from your paycheque you can put towards investing. The higher your savings rate, the fewer working years until retirement. In theory, the way you spend will be about the same in retirement (less on mortgage and insurance, but maybe more on travel) as it is today. 

Average savings rate for Canadians until retirement

 

Savings Rate %	Working years until retirement
5	66
10	40-50
15	34-43
20	31-37
25	28-32
30	26-28
35	24-25
40	22-23
45	19-22
50	17-21

How much do people my age have saved on average?

No matter how old are young you are, saving for retirement is a big job. Even if you start very young, it takes a lifetime of commitment to adequately save for a comfortable retirement. But how do your retirement savings compare with others around your age? This table shows how much Canadian households have saved, on average, by age and whether the savings are in a registered retirement savings plan (RRSP), tax-free savings account (TFSA), or a non-registered account (*3).

 

Age range	Type of savings
	RRSP	TFSA	Non-registered	Total saved
Under 35	$17,753	$7,577	$30,977	$56,307
35 to 44	$49,014	$8,778	$46,367	$104,159
45 to 54	$98,447	$10,823	$105,050	$214,320
55 to 64	$150,312	$21,489	$127,007	$298,808
65+	$129,920	$26,471	$162,130	$318,520

Note that this table only takes savings and investments into account. It doesn't consider total net worth, which is with the value of all your assets (including savings as well as things like your home) less all of your debts.

What can I do to save more for retirement?

Saving for retirement is not an easy task. But there are things you can do to make your job easier.

Consider your overall financial picture. The amount you have saved is only one indicator of your potential for a comfortable retirement. Consider your total net worth. For example, if you have little in savings but own a home and have paid off your mortgage, your net worth maybe higher than someone with sizable savings, and little or no equity in their home. If you have consumer debt, such as credit card debt, it almost always makes sense to pay off your balance before putting money towards savings.

Take advantage of the appropriate programs. The two best financial tools to save for retirement are the RRSP and TFSA. Both of these shelter your investments from tax, letting them grow faster and getting you to retirement sooner. 

Invest your money. Savings accounts are great, but they can only grow your money so much. The best high interest savings account in Canada currently pays only 1.55%. You can hold just about any type of investment in your RRSP or TFSA, so consider investing your retirement savings in a well diversified portfolio that can earn more money in the long run.

Just get started. ‘Some’ savings is better than no savings, and even if you're putting away $10 a month for your retirement, you're doing a favour for your future self. Don't let the thought that you can't save enough stop you from saving at all.

The bottom line

The earlier you start saving for retirement, the better off you'll be. But even if you haven't gotten started yet, there's still time for you - no matter how old you are. Work on getting your finances in order, pay off your consumer debt and take advantage of your RRSP and TFSA to help your retirement savings grow.

Want to learn more about saving for retirement? This article takes a closer look at how much you should have saved for retirement. And this helpful tool lets you calculate how much money you can save in a year. 

1 Some assumptions: You spend 25 years in retirement, your investments earn 2% annually while you’re retired, you make a single annual withdrawal increasing by 2% every year to match inflation.

2 Some assumptions: Your savings goal is $800,000 by age 65, your investments earn 6% annually, and you make a single annual deposit equal to 12 monthly payments.

3 Source: Statistics Canada Table 11-10-0016-01. Data reflects the average savings of Canadian households in 2019. Age group refers to the primary income earner.