Dec 17: Best from the blogosphere – Canadians need to save 11 times their salary by retirement
December 17, 2018
A look at the best of the Internet, from an SPP point of view
Canadians need to save 11 times their salary by retirement
There are many “rules of thumb” in the world of money. One used to be that your rent should equal one quarter of your monthly take home pay. Another used to be that your house should be worth twice your annual salary.
According to research by Fidelity in the US, reported by Market Watch, people should have saved a year’s salary for retirement by age 30.
By age 40, Canadians should have saved three times their salary for retirement. And by “average retirement age,” usually early 60s, Canucks need to have saved 11 times their salary, the article says.
The article tempers the alarm it raises with these high figures by pointing out that they are just guidelines. “Everyone faces different circumstances, and therefore need varying amounts of money by the time they retire,” the article reports. “Some people may choose to rent or pay off a mortgage, while others may not have any housing obligations except for taxes and utilities. Some retirees may want to take more vacations, or have more medical bills to pay, or have intentions with their money, such as an inheritance for their children and grandchildren.”
And don’t forget that the contributions you make towards CPP and a portion of your income tax are retirement savings payments, since you will get a CPP pension one day and likely Old Age Security as well.
That said, Statistics Canada, via the CBC, reports that the average Canadian saves only four per cent of his or her income, and that there was a whopping $683.6 billion in unused RRSP room as of the end of 2011. The article notes that someone saving $2,000 a year from age 25 on would have $301,478 by age 65. That might not be 11 times his or her salary, but it is a pretty good number.
Retirement savings, like losing weight or getting out of debt, is overwhelming when you first set out to do it. But if you start small, and chip away over the years at your target, you will be surprised to see how far you’ve come when the time comes to log out of work for the last time.
If you’re not fortunate enough to have a pension plan at work – and if you do, and have extra contribution room each year – the Saskatchewan Pension Plan is a great way to build your retirement savings. You can start small, or can contribute up to $6,200 per year. You can transfer savings in from other retirement savings vehicles. The money is invested professionally at a very low fee, and when you retire, you’ll have many options for turning savings into a lifetime income stream. Check it out today.
|Written by Martin Biefer
|Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22|
Canada Pension Plan, CBC, CPP, Fidelity, Market Watch, OAS, Old Age Security, Registered Retirement Savings Plan, RRSP, Statistics Canada