Have you ever wondered how your retirement savings stack up compared to others in your age group?
It’s a good question to ask. Although your actual retirement needs are personal and absolute, it doesn’t hurt to know how you stack up compared to your peers. This information can tell you whether you’re saving as high a percentage of your income as you ought to be. If you’re doing well compared to the average, you have a reason to be optimistic, even if your amount isn’t quite what it needs to be.
65 years old is a pretty common age for Canadians to retire. It’s when you are presumed to start taking your Canada Pension Plan (CPP) — though you can take it at any time between 60 and 70 inclusive. Also, it’s just a few years before the age at which Registered Retirement Savings Plan (RRSP)/Registered Retirement Income Fund withdrawals become mandatory (71). In this article, I will share the average RRSP balance at age 65 in Canada and discuss its implications.
$129,000
According to Ratehub, the average 65-plus-year-old Canadian has $129,000 saved in their RRSP. The figure rises to about $160,000 if you include the Tax-Free Savings Account (TFSA). In total, the average retiree has $319,000 saved.
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A note on who Ratehub’s survey sampled. It took a poll of Canadian adults and sorted them into age groups. The figure above is for “ages 65 plus.” This means it’s technically not the average for a 65-year-old retiree, but it’s the closest available figure. The figure for age 65 specifically is probably slightly higher, as peoples’ retirement savings decline starting around age 65, reversing the prior trend of rising in early/middle adulthood.
What does the average Canadian retiree’s RRSP balance tell us? Many Canadians will need generous pensions in order to truly retire. Although most Canadians retire from their “official” job on schedule, many have to take part-time jobs in retirement to make ends meet. $129,000 in the RRSP and $319,000 in total are inadequate sums. A $319,000 portfolio yielding 2.8% only pays out about $8,932 per year in dividend income. Unless you think you can time the markets and make gushing capital gains, you’ll need more than $319,000 to retire on.
One alternative
If you have more than $319,000 saved for retirement but not quite enough to quit working, one method you could use to make it work is to invest in a high-yield portfolio. I mean “higher-than-average” yield, not true junk bond stuff: outrageously high yields usually indicate a risky investment.
One stock you could consider for your high-yield portfolio is Royal Bank of Canada (TSX:RY). It is a Canadian bank with a 4% dividend yield. A $500,000 portfolio yielding 4% pays $20,000 per year. If you add CPP and Old Age Security to that, you might be able to cover all your expenses.
Royal Bank has distinguished itself with its stability. It was around during the Great Depression, the Savings and Loan Crisis, the 2008/2009 financial crisis, and the 2023 banking crisis. In none of these crises — all of which saw several banks collapse — did RY face the risk of going under. In many of these crises, RY did not even cut its dividend.
How has RY been able to achieve such stability? It’s simple: by playing it safe. Banking is the kind of industry where, if you take enormous risks, you eventually go bankrupt when market conditions turn against you. Some bankers take enormous risks because they can collect huge bonuses before their employer finally fails, but shareholders get wrecked when bankers prove incompetent. Royal Bank has avoided this kind of thing and has rewarded its shareholders by doing so.
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The average retirement age in Canada is 65, and according to a Ratehub report, the average 65-year-old has around $129,000 in their RRSP (Registered Retirement Savings Plan). The figure rises to $160,000 if you include the TFSA (Tax-Free Savings Account), while total savings are close to $319,000.
How Much Money Do You Need to Retire With $100,000 a Year Income? To retire at 65 while having a salary of $100,000, you need approximately $1.5M if you plan to live until the age of 85 and $2.1M if you plan to live until the age of 95.
According to Statistics Canada's 2024 Canadian Income Survey, the average after-tax retirement income for senior families in 2022 was $74,200, or $6,183 per month. For individual seniors, it was $33,600, or $2,800 per month.
The “4% rule” is another popular method for working out how much you need to retire in Canada comfortably. The idea is that you take out 4% of your savings for every year of retirement. For example, to be able to spend $40,000 a year in retirement, using the 4% rule, you would need to save $1,000,000.
$129,000. According to Ratehub, the average 65-plus-year-old Canadian has $129,000 saved in their RRSP. The figure rises to about $160,000 if you include the Tax-Free Savings Account (TFSA).
It is possible to retire with $600,000 if you plan and budget accordingly. With an annual withdrawal of $40,000, you will have enough savings to last for over 20 years. Social Security retirement benefits can increase your monthly income by approximately $1,900.
What is considered high net worth in Canada? Individuals with a net worth of $1 million or higher is considered high in Canada. Net worth is calculated as total assets less liabilities, like mortgages and other debt.
With a portfolio value of $1.3 million or higher, that's plenty to spend $5,000 per month from age 50 to age 95, increasing spending by 3% inflation for sure.
However, the amount generated by doing so on a smaller asset base won't be enough for families with young children or retirees in major cities. For the average, retirement-age, prudent Canadian investor, $350,000 may be just enough to live on. However, much more would be needed for a comfortable retirement.
For 2024, the maximum monthly amount you could receive if you start your pension at age 65 is $1,364.60. The average monthly amount paid for a new retirement pension (at age 65) in April 2024 was $816.52.
Gen Xers have a median of $82,000 saved for retirement. 9 Investors aged 45 to 54 have an average of $313,220 saved for retirement. Investors aged 55 to 64 have an average of $537,560 saved for retirement. Board of Governors of the Federal Reserve System.
According to data from the Federal Reserve's most recent Survey of Consumer Finances, the average 65 to 74-year-old has a little over $426,000 saved. That's money that's specifically set aside in retirement accounts, including 401(k) plans and IRAs.
If you manage to stay healthy and never need long-term care then $600,000 could be enough to sustain you in retirement. On the other hand, if you need long-term care in a nursing facility that could take a large bite out of your savings.
We estimated that most people looking to retire around age 65 should aim for assets totaling between 7½ and 13½ times their preretirement gross income.
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
That's based on the agency's estimate that the average annual benefit was $29,806 for Social Security recipients who are age 65. The average yearly benefit for 65-year-olds in 2023 has risen to $30,708, or $2,559 a month.
Employee Benefit Research Institute (EBRI) data estimates that just 3.2% of Americans have $1 million or more in their retirement accounts. Here's how much most Americans have saved and what you can do to boost your retirement savings. Don't miss out: Click to see our list of best high-yield savings accounts.
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