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How Much Do I Need to Save for Retirement?

Delwin Graham - Dec 09, 2021
For anyone intending to retire (which is just about everybody), the perennial question is – How much do I need to save for retirement?

For anyone intending to retire (which is just about everybody), the perennial question is – How much do I need to save for retirement? The perennial answer is – It depends. What each person needs will depend on a number of factors including your current age and the age at which you plan to retire or are forced to retire because of declining health, job loss, or any other circumstance beyond your control; how long you plan to live, based on family history; how much you plan to spend in retirement; and where your retirement income will be coming from.

Of course, all of this is not that helpful. As a result, retirement planners have offered various “rules of thumb” about how much you need to save – somewhere near $1 million, 12 times your pre-retirement salary, etc.

Perhaps the most nuanced estimate to help determine whether your retirement plan is on the right track is – Aim to save at least 1X your salary by 30 years of age, 3X by 40, 6X by 50, 8X by 60, and 10X by 67. This estimate is based on the assumptions that a person saves 15% of their income annually beginning at age 25 (which includes any employer match); invests more than 50%, on average, of their savings in stocks over their lifetime; retires at age 67; and plans to maintain their pre-retirement lifestyle in retirement. (Cf., “How Much Do I Need to Retire”, Fidelity Viewpoints,, 08/27/2021)

Of course, these assumptions often don’t (hardly ever) hold true. The two key factors that will affect the amount you need to save will be – When you plan to retire and how you want to live in retirement.

1.  When you plan to retire. The age at which you plan to retire can have a big impact on the amount you need to save. The longer you can postpone retirement, the lower your present savings can be. That’s because delaying gives your savings a longer time to grow, you’ll have fewer years in retirement, and your CPP/OAP benefit will be higher. Of course, you can’t always choose when you retire – health and job availability may be out of your control. But one thing is clear – Working longer will make it easier to reach your savings goals.

2.  How you want to live in retirement. Your lifestyle in retirement will affect the amount of money that you will have to save. In other words, do you expect your expenses to go down when you retire? Retirement planners will often presume that you will require only 80% to 90% of your annual pre-retirement income, but this doesn’t take into account the added expenses of expensive hobbies (e.g., car collections) or travel in the early stages of retirement. Often, the income that is required in retirement will decline with age as your mobility declines and your interests narrow.

Of course, these are idealized estimates – What if you’re behind? If you are under 40, the simple answer is to save more and invest for growth through a diversified portfolio. But growth must be prudent. If you are over 40, the answer might be a combination of increased savings, reduced spending, and working longer if possible.

In any case, don’t panic. Regardless of where you start, it is important to focus on the goals at hand. Feel free to contact me at or 780-408-1518 to discuss how to optimize your current retirement plan or to build a new way forward.