OTTAWA – A new survey by BMO financial group has concluded that Canadians will need approximately $1.7M saved in order to retire, a figure to achieve which a Canadian earning an average income would need to set aside approximately 100% of their paycheck every month for the next 40 years.
While experts admit the figure may seem eye-watering at first, they advise that the figure remains fully achievable.
“100% of your after-tax income is a lot,” admits Certified Financial Advisor Justin Taber. “But I think a lot of Canadians will find that with a few lifestyle adjustments, maybe cutting the odd vacation or night out, that setting aside the totality of their monthly earnings for the entirety of their adult life is a lot more achievable than you’d think.”
Taber clarified that in the case of couples, while it was tempting to think one partner might be able to commit the whole of their paycheck to savings while the other could use theirs to support the household, since the amount required to retire would be twice as much, Canadian couples should also expect to set aside the whole amount of both their paychecks.
“We know that saving every cent of your earnings in order to be able to retire presents a challenge, but we encourage Canadians to use the tools we have made available to them” said Prime Minister Trudeau, pointing to the increase in the TFSA limit as just one of many vehicles that could help Canadians save all their worldly earnings in order to theoretically retire.
Across the country, most Canadians admitted they were saving far less than the recommendation.
“I’ve been trying my best to put a few hundred dollars in my RRSP every month, but after rent, student loans, and food there’s not much left,” says Andrea Omar, who works as a speech therapist in Toronto. “I’ll have to make up for it in a few years by saving 400% of my income instead.”
“I’ve been saving half my income every month since I was 18,” says Marketing Manager Jeff Nowak. “But after crunching the numbers, I’m still not going to be able to retire until I’m 135.”
In light of the media attention the survey has garnered, financial experts have clarified that the figure of $1.7M presumes the market performs better than it has for the last 20 years, the cost of food stops increasing, the real estate market cools down, and the Canada Pension Plan doesn’t go bankrupt, in which case Canadians will likely need to save even more.