4 Canadians

We are inundated with a bazillion books about investment strategies; the “best” portfolio; low-cost DIY options; mutual funds vs. ETFs; options; or working with an investment advisor. I too, from time to time, have reviewed different authors to see what they have to say. I am by no means a guru of any kind, but I think that when it comes to investing one thing is certain - it takes time and money.

If you want to save for the long-term it takes a diversified, balanced, risk-aligned portfolio, time, and regular contributions (preferably monthly). It's amazing how many people say, “I'll do it later”. There is a lot of discussion about where to prioritize money – mortgages; debts; savings; etc. If you need hundreds of thousands of dollars socked away for your retirement years, then you can bet that it's going to take you a lot of years and principal and interest to save that kind of money. If you don't believe me, find a financial calculator, and see for yourself or read on and I’ll do the math with you.

To make my point, let's work backwards. Let me tell you a little story about 4 Canadians. We start talking about life and eventually the subject of retirement comes up. In our conversation, they all agreed that in retirement they would want a pre-tax monthly income of $7500. So, working backwards here is the breakdown. Let’s assume that your retirement income will comprise of two parts: gov’t pensions and retirement savings. For simplicity, I will lump in all types of registered and non-registered savings into one group and that is your retirement savings amount.

Let’s agree that everyone will retire at age 65. Let’s start with the gov’t pensions. At age 65, the max CPP benefit is $1,253.59/mo. and the max OAS benefit is $648.67/mo. (2022 figures from Service Canada). The gov’t pensions will total $1902.26/mo. That leaves $5597.74/mo. to be driven out of personal retirement savings. This personal amount is going to come from various employer and personal plans. These plans could include DCPPs, DBPPs, RRSPs, LIRAs, TFSAs, Life Insurance and OPEN accounts. If you don’t know the abbreviations, then check out my recent article entitled “Using the Right Account”.

To receive the additional $5597.74/mo., to age 100, a 65-year-old needs to have accumulated $1,109,149.34. This is no small feat. Now that I have your attention... How much time and money will it take to accumulate $1.1MM?

Now back to our four Canadians. They are various ages, 25, 35, 45 and 55, and they all start saving at the same time. Unfortunately, these individuals will not spend the same amount. This is where the story gets exciting! The chart below fills in the numbers.

So, which Canadian are you? Retirement savings needs to be systematic. The sooner you get started the better. Those who participate in employer plans will have the benefit of sharing the contributions with their employers. It is the self-employed that unfortunately must take on the entire monthly amount. It is always beneficial to sit down with a Financial Planner and determine what your specific numbers are. Dream your dreams, set your goals, and meet them. Let me help you.