Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances.
Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities.
Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. Amy’s work can be found regularly on the Financial Post and MoneyWise Canada.
When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog Finley, and travel.
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Retirement planning is always important. But for Canadian seniors, it becomes a whole lot more in focus. That focus, however, may not exactly come with more clarity about how much you should have saved in retirement.
So, when it comes to those later years, whether you’re retired or now, how do you stand up to the average? And what’s more, how can you increase your retirement income safely to live out your retirement years with plenty of cash on hand?
What’s the average?
As of the most recent information from Statistics Canada, the average Canadian senior family made $69,900 in 2021. When looking at a single senior, that dropped down to an average of $31,400. So, if you’re a senior couple, that means you would be bringing in $5,825 per month and $2,616 per month as an individual.
The question now, of course, is whether this is enough –especially during these times. There was an impact from several factors during 2021. This included COVID-19 and its impact on income. Furthermore, there was also a market income growth that led the way due to employment income recovering. Finally, there was a decrease in government transfers in 2021 that also impacted annual income.
So, to figure out what you would need to create more income, you also have to consider what you would need these days. It wouldn’t be unheard of to think that over $6,000 as a senior family would be necessary, given the increase in inflation. So, how does a retiree even get started?
Set it up
First off, retirees are going to want to meet with financial advisors to come up with a strategy on how to create enough income in retirement. This will likely first mean looking at all sources of income. Are you taking out Old Age Security (OAS), the Canadian Pension Plan (CPP), and your Registered Retirement Income Fund (RRIF)?
There are also other sources of income you may have or even want to consider setting up. This could include Guaranteed Investment Certificates (GICs), capital gains from your assets such as a home, and even business investments.
But another great opportunity comes from using your Tax-Free Savings Account (TFSA). Once you start taking cash out of your RRIF at age 70, you’ll want to have another way to invest. And the TFSA is perfect. There are no taxes, and you can take it all out at once if you so choose. So, let’s look at one option to consider as you age to increase that monthly amount.
Pick up a solid ETF
Exchange-traded funds (ETF) are perhaps the easiest way to increase your monthly cash flow. What’s more, they don’t take any upkeep! So, even if you end up with health issues, you don’t have to worry about your finances. This can be key if you’re living on your own with no family nearby.
An excellent option to consider is Vanguard Retirement Income ETF Portfolio (TSX:VRIF). This ETF holds a 30% mix of stocks with a 68% mix of bonds as of writing. This provides you with fixed income and a bit of growth from stocks. While growth in shares isn’t going to be absurdly high, dips won’t be low either. Shares are currently up 4.4% in the last year and 7.8% in the last three months alone!
Meanwhile, you’ll be bringing in a safe and steady dividend yield of 4.32% as of writing. And that income isn’t going anywhere, given the heavy investment in bonds. Then, you might want to consider making planned contributions over the next few years, along with planned withdrawals, when you enter retirement. Retirement can be wonderful but also stressful. So, by setting yourself up with these long-term strategies, you can enter it without a worry in the world.
As of the most recent information from Statistics Canada, the average Canadian senior family made $69,900 in 2021. When looking at a single senior, that dropped down to an average of $31,400. So, if you're a senior couple, that means you would be bringing in $5,825 per month and $2,616 per month as an individual.
According to the 2021 Canadian Income Survey, the average after-tax income for senior families in 2021 was $69,900. And for a senior individual, it was $31,400. That works out to $5,825 per month for a couple and $2,616 per month for an individual.
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.
The average retirement income for U.S. adults 65 and older is $75,020. The median income for that age group is $50,290, according to data from the Census Bureau and Bureau of Labor Statistics. On a monthly basis, the average income for U.S. adults 65 and older is $6,252.
In Canada, the average person has around $272,000 saved by the time that they retire. This averages out to a household income of $514,000. This is just in cash savings though, These numbers don't include assets or any pensions that you will receive.
In order to have a retirement income that's considered to be upper middle class in Canada, you would need to have around $1.7 million saved. This would give you an average income of around $100,000 annually for a total of 25 years.
However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
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.
What is the average and median retirement savings? The average retirement savings for all families is $333,940 according to the 2022 Survey of Consumer Finances.
Many Canadians wonder how much you should have in your net worth when it comes the time to retire. As mentioned above, there are retirement savings that aren't included in this calculation. The average Canadian net worth when they hit retirement age is just over $500,000.
And its 2019 figures indicate that Canadians under 35 had average savings of $10,720 in the bank, along with $8,395 in a tax-free savings account (TFSA), and $9,905 in a registered retirement savings plan (RRSP).
Overall, retiring at 60 is doable with $500,000 but it may not be doable for you. It really depends on your personal living situation and what your potential expenses are going to be.
Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you. However, it's important to remember there is no one-size-fits-all amount.
The Star reached out to several financial experts and all agreed: you don't need $1.7 million to retire. In fact, that number is “absurd,” said Malcolm Hamilton, a retired actuary. “This survey says all Canadians need to save the same, but we know that's not the case,” said Hamilton.
If you want to retire early, you will have to find a way to replace your income during that six-year period. In most cases $300,000 is simply not enough money on which to retire early.
Introduction: My name is Terence Hammes MD, I am a inexpensive, energetic, jolly, faithful, cheerful, proud, rich person who loves writing and wants to share my knowledge and understanding with you.
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