Canadians think they need $756,000 to retire; failure to plan means most will fall short

My latest Financial Post column looks at a CIBC survey released Thursday that finds on average individual Canadians believe they’ll need $756,000 in order to retire.

Of course, most fall woefully short because they haven’t even crafted a financial plan to get there. And you know the old sayings, “Failing to plan is planning to fail,” or “If you don’t know where you’re going you’ll probably end up somewhere else.”

You can find the full column by clicking on the highlighted headline: The magic number for Retirement Savings is $756,000, according to poll of Canadians.

Considering that on average Canadians hope to retire by age 63, the fact that almost one in five haven’t even begun to even think about retirement suggests a bit of a disconnect. And women are consistently more behind in their retirement planning preparations than men. That’s a problem, considering that women have longer life expectancies and their money will therefore have to last longer.

Depending on aspirations, the “Number” can range from Zero to $2 million

\While the CIBC study looks at individuals rather than couples, the column quotes regular Hub guest blogger Marie Engen, who described three levels of retirement — basic, average and deluxe — in this 2016 blog: How much do you REALLY need to retire?  (The original blog ran on the Boomer & Echo site late in 2015.) Some with modest needs can save nothing and subsist on the $38,000 senior couples can get from CPP and OAS.

More well-heeled workers with Defined Benefit plans will also do okay with a combination of their employer pensions, CPP and OAS, plus whatever limited RRSP room they’ll have after the Pension Adjustment. This is why top actuaries like Fred Vettese or retired pension expert Malcolm Hamilton have argued retirees need to “replace” only about 50% of their working incomes once retired. That assumes mortgage and other debts have been eliminated, the kids are raised and launched and of course there is no longer the need to save for retirement or to pay the high income taxes required to fund everything in the wealth accumulation years. (Vettese is about to release a new book, Retirement Income for Life: details will be on the Hub shortly.)

However, middle-income workers lacking DB pensions will need anywhere from $250,000 to $1 million to generate a mid-level retirement of between $42,000 and $72,000 of joint annual income, Engen calculates.

And at the top end, couples aspiring to a $100,000 annual income may well need more than $2 million. Just this Monday, the Hub ran a guest blog by Akaisha and Billy Kaderli that showed they can live frugally on much less. See Do you need two million dollars to retire? 

The FP column closes with a quote from Retirement Navigator’s Doug Dahmer, who said the real message buried in the CIBC statistics is that “people need to get more engaged in planning what they want their future to look like.” Dahmer has been the Hub’s “decumulation” guest blogger since our inception in 2014: the past weekend on this site we unveiled details of a new financial planning approach Dahmer calls Click here to retrieve details: Turning Financial Planning Upside Down.

2 thoughts on “Canadians think they need $756,000 to retire; failure to plan means most will fall short

  1. When trying to picture retirement costs, how many people factor in health care, especially with the real potential of needing a caregiver or having to move into a care facility when independent living is no longer physically possible?
    Perhaps I generalize, but people tend to think of retirement as the staging ground for exotic vacations, dining out more frequently, buying lots of goodies for grandchildren…in other words, what they can relate to that’s not scary.
    I believe the cost of retirement will be more problematic for women than men, and not just because of a longer lifespan. Canvas a dozen women in the workforce today and it would be interesting to see how many know the status of their pension plan or the dollar figure they are expecting in retirement.

  2. Many folks are unaware that not everyone qualifies for full cpp or much of a cpp. Think stay at home parents and time off for elder care
    Yes cpp has ways to try to even this out but if a woman hasn’t worked since having a family this will certainly impact her cpp. And assuming she is the survivor her share of her spouses post widowhood. (and the reverse)
    Oas is dependent on years in Canada. There are charts for low to moderate incomes in retirement including applying for GAINS and gis.
    Further the source of the survey. Cibc was cited if you google in a class action for selling those mortgage swap assets. That not only paid out a much lower return than the real level of risk were known, but imploded.
    Additionally there is a class action on going again if you google involving many banks and their failure to pay their employees over time
    Perhaps is said employees were paid their due they could afford to plump up their nest eggs
    It isn’t always the fault of the “dumb money” as the financial industry would like to claim
    There are further enablers of the headwinds retail who have spare change face. Such as buckpassing politicians and government entities who delegate duties of oversight to funded by industry aros and ombudsman who legally can tinker with the priority in which they assess and handle complaints so the outcome is not the same even remotely to what the original statutes or codes of conduct for the industry state. Additionally iiroc does not see making a wronged retail investor whole as part of it investor mandate to protect retail consumers. Huh?
    There is a large
    American pension fund suing our six banks and three others (the colorado fire and police pension) for fiddling it is alleged with interest rates and not to the advantage of the pension fund.
    The question also is how much more robust would consumers self funded erzatz pensions and nest eggs be if the financial industry and the banks and oversight were held to the standard of fiduciary ie being in the consumers best interest. As the current set up for the majority of advisory services is “suiitable.” but not the very best interests for the client.
    Meaning risk level being equal the advisor can recommend vehicles that have a higher fee kick back to them not the consumer
    No one seems to understand the implications of the above also are discriminatory. And have a hugely negative impact on the financial well being of retirees but the roots of. Such discriminatory practices (linked to age) start as soon as a consumer opens an account to try to build a nest egg for later.
    There is a shocking lack of political will to fix this mess. Why?
    As for women. There is still the gender wage gap
    Other examples where the best laid plans have gone pear shaped under the uncaring eyes of government would be the plight of the sears pensioners where former employees have to stand in line behind all other creditors to pick over what remains
    (akin to the era of Rosa parks being shuffled to the back of the bus or viola desmond also a woman of colour with vision challenges removed to the back of the theater
    Age is just as a deserving ground under our humna rights codes and act as race and gender but this aspect of human right law even in our aging demographic is being ignored
    The roots of age linked discrimination start as soon as a client opens an account to build up a nest egg for later. Resulting in a less than plump cushion later in life. Where the ability to mitigate the harm declines drastically
    Ask why consumers bother to use such services profered by the industry? It certainly isn’t to enrich the banks from the point of view of the retail investor but to try to build up those nest eggs for later
    No matter how diligently an investor plans they face significant headwinds most big pension plans don’t. Hence the disparity in out come
    You will hear about the poster ponzi schemes and wipe out of savings but little about the discriminatory practices and policies that are picking consumers life routine mainstream banking financial industry players
    Our politicians need to stop their tap dance and actually work for the electorate.
    Oddly the behaviour of the financial industry can be blatantly non compliant with the bills that are voted into law. Which subsequently are not enforced but oddly our MP and MPPS miss the disconnect
    No amount of planning can overcome such system barriers and deceit
    And yet despite the known aging demographics our politicians seem to lack the will to fix this mess
    And yes as much as politicians may want to deny this our banks were bailed out to the tune of 114 billion with help from the US federal reserve post 2008. For being underwater for failing to comply…and yet our policians continue to cater to powerful industry lobby groups ignoring issues constituents bring to them
    I was personally told the Hon Morneau was too busy to wade in and address this my local MP
    The reception at the MPP s office does nto bear repeating
    No amount of tickering with first past the post electoral systems is going to fix the governance mess produced by serial buck passing and delegating of duties off the government plater to funded by industry entities (there are parallel issues for environmental items if you follow the TYEE re BC issues)

Leave a Reply