With inflation skyrocketing in Canada, 1 million dollars isn’t what it used to be.
It has a lot of people wondering if 1 million is even enough to retire these days.
The answer is that it depends on your lifestyle and many other factors. Here’s what we’ll go over below to help you try to figure this out:
- How long you’ll be retired for
- What your monthly “income” will be from government pensions and assets
- How much money you will spend each year
- If you invest your money, how well it performs
Things to Consider During Retirement Planning
Here are four questions to consider when you start your retirement planning.
1. When Do You Plan to Retire?
The age at which you would like to retire can make a big difference in how much you should have saved.
As a rule of thumb, the earlier you retire, the more money you will need to have saved up for your retirement years.
The later you retire, the lower your savings factor will be, mostly because your savings will have a longer time to appreciate, and you will also have fewer years in retirement.
In addition, your Canada Pension Plan (CPP) payments will be higher the longer you delay your retirement, making it even “easier” to retire later.
According to Statistics Canada, Canada’s national statistical agency, the average retirement age of Canadians in 2021 was 64.4 years old.
Below you can see further details of this statistic and how retirement age changes in different classes of workers in Canada.
| Class of Worker | Average Age of Retirement, 2021 |
| Private Sector (those who work as an employee of a private firm or business) | 64.8 |
| Public Sector (those who work for a local, provincial or federal government, government service or agency, a crown corporation, or a government-funded establishment such as a school or hospital) | 62.4 |
| Self-employed (incorporated and unincorporated working owners, self-employed persons who do not have a business and persons working in a family business without pay) | 67.6 |
If you plan to retire before the average (around 64 years old), you might want to consider saving up more than $1 million for retirement.
If you plan on retiring after the average (perhaps around 70 years old or later), you may need less than $1 million for your retirement.
Related Reading: Best Age to Retire in Canada: 55, 65, or Never?
2. How Do You Plan to Live When you Retire?
How you plan to live after your retirement is just as important as when you plan to retire.
What kind of life do you plan to be living as a retired person? Do you expect to spend less, the same, or more than the amount you were spending pre-retirement?
Do you have travels and experiences you’ve been putting off for retirement? Do you want to be spoiling your grandkids?
What kind of life do you plan to be living as a retired person? Do you expect to spend less, the same, or more than the amount you were spending pre-retirement?
Do you have travels and experiences you’ve been putting off for retirement? Do you want to be spoiling your grandkids?
Do note that according to the StatCan Survey of Household Spending, the average spending per household for Canadians over 65 was $60,359 (including taxes) in 2017.
Taking inflation and rising costs of living over the years, we can expect this number to be around $64,000 now.
3. How Much Government Income Will You Receive?
The third most important thing to consider when you are thinking about retirement planning is your monthly CPP payment and other “asset” incomes (such as rental income.)
CPP payments are different for everyone as things such as your income before retirement, type of income, and the number of “low earning” years will have an effect on it.
According to StatCan, however, the average CPP payout for 2020 was about $710.41 per month.
CPP payments are different for everyone as things such as your income before retirement, type of income, and the number of “low earning” years will have an effect on it.
According to StatCan, however, the average CPP payout for 2020 was about $710.41 per month.
4. Your Investment Returns
This will be the hardest factor to predict, but it’s an important one. How you decide to invest your nest egg will be a big factor in how long your retirement income will last. It’s important to do a full financial plan, see how much risk you can take on in your portfolio, and invest accordingly.
Can You Retire With $1 Million in Canada Calculation
When you have an estimate of these numbers, you can use the following equation to figure out whether $1 million will be enough:
(Annual expenditure X predicted number of years in retirement) – total income you’ll receive in retirement.
Based on these three notions regarding your retirement age, retirement lifestyle and CPP income, you can do a quick calculation to figure out whether you can retire on $1 million in Canada.
For instance, let’s say that Adam wants to retire at the age of 65. To be safe, he would like to plan his retirement until he’s 90 years old. That’s 25 years in retirement.
Adam currently spends about $50,000 per year and plans to spend about the same during his retirement years (do note that this is about $10,000 less than the average expenditure for his age demographic.)
He expects that his monthly CPP income will be around $700, which amounts to $210,000 over the course of his 25 years of retirement ($700 x 300 months in retirement.)
By simply calculating ($50,000 x 25) – $210,000, he can find that $1,040,000 will be enough for his retirement years.
If this example is on par with the type of retirement you are planning to have, then, yes, you can retire on $1 million in Canada!
Do keep in mind that this is an incredibly basic calculation but can be a great starting point for you to figure out how much money you will need for your retirement.
Although it does not take things such as inflation, returns on investment (ROI), or lifestyle increases into account, it can lead you in the direction of an accurate ballpark.
You can also use these two free retirement calculators: the Wealthsimple Retirement Income Calculator and Sun Life Retirement Income Calculator.
Can I Retire at 60 With 500k in Canada?
It may not be easy to retire at 60 years old with $500,000 in Canada for your entire household. Why? Take this simple calculation:
If you retire at 60 and plan for 30 years in retirement, spending the average amount spent by senior households in Canada, you will need about $1,800,000 (30 years x $60,000 per year.)
Let’s say that you receive $700 each month as part of your CPP (though it may be less than that if you retire at 60). You will get about $252,000 throughout your retirement ($700 per month for 360 months.)
Even if you take returns on investment into account, you will need about $1,500,000 to retire at the age of 60 in Canada (spending the average amount until you are 90.)
But this isn’t to say that it can’t be done. I know that planning until 90 is generous (given that life expectancy in Canada is 82), and some seniors are comfortable living on about $40,000 or even less each year (especially if they’ve already paid off their mortgage!).
It really all depends on your lifestyle, investment returns, and years spent in retirement.
FAQs
How much does a single person need to retire comfortably in Canada?
Retiring comfortably in Canada as a single individual involves various factors, primarily based on the lifestyle one aims to maintain. On average, financial experts often suggest that retirees will need about 70% of their pre-retirement income to maintain their current lifestyle. For a modest lifestyle, a ballpark figure suggests that a single person might need between $25,000 to $30,000 annually after taxes.
This amount includes government pensions like the Old Age Security (OAS) and the Canada Pension Plan (CPP). However, if one aims for a more comfortable or luxurious retirement, factoring in travel, hobbies, and other leisure activities, this number can significantly increase.
How much money does a couple need to retire in Canada?
For couples in Canada looking to retire comfortably, the combined annual requirement can be estimated to be between $40,000 to $70,000 after taxes for a modest lifestyle. This calculation assumes both parties are receiving full Old Age Security (OAS) and Canada Pension Plan (CPP) benefits, and it covers basic expenses such as housing, healthcare, transportation, food, and a few leisure activities.
For couples desiring a more luxurious retirement—perhaps including regular travels, dining out frequently, or engaging in high-end hobbies—the annual requirement can exceed these estimates. It’s also crucial to account for the potential of increased medical expenses in later years.
Conclusion
It is certainly possible to have a comfortable retirement in Canada with $1 million.
As I said, things such as lifestyle, retirement age, and pension payments make a big difference, so it’s best not to take the word of others and do your own calculations instead.
If you have a financial planner, they’ll be able to help you with this kind of thing. It never hurts to ask for assistance from a professional who can point you in the right direction and give you a good depiction of what your retirement might look like.
Want more tools to calculate how much you’ll need to retire? Check out this post!
Hi Am I missing the part about the OAS payments as part of your income?
Maximum monthly payment amount
65 to 74 $687.56
75 and over $756.32
Your annual net world income in 2021 must be Less than $129,757
https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/payments.html
Sure, that link you sent states: OAS is considered taxable income and is subject to a recovery tax if your individual net annual income is higher than the net world income threshold set for the year ($79,845 for 2021).
I’m wondering where you got your figure of $60,000 per year? According to a financial analyst at the Toronto Star, “If you’re looking for a middle-of-the-road benchmark, consider that an average Canadian senior’s spending — including income tax — is about $43,000 a year for singles and $65,000 a year for couples.” Others say this in on the high side. It depends of course on many factors, but for people who think their retirement is going to be endless travel and golfing adventures, studies have shown that retirees tend to travel about the same amount in retirement as they did in their later working years, oddly enough. I have no use for “rule of thumb” advice saying you need 70% of your pre-retirement income. That would be an astoundingly luxurious retirement for many of us. And as you age – particularly when you hit 80 – your spending tends to significantly decrease. So to say you need $60,000, every year, until you die at 90 is not useful advice. My mother lives in a retirement home (one of those places that’s like a cruise ship on land – a suite with a kitchen, plus a common dining room with great food, plus all sorts of activities and etc) and doesn’t even spend $40,000 a year, despite her medical expenses. So even with serious health issues, you aren’t necessarily going to be destitute on $40,000 a year, in fact she feels she lives in luxury.
Great question Barb! I got my data from Stats Canada, of average expenditure. It is a very general example. I do also note the comment here, which somewhat addresses your issue: But this isn’t to say that it can’t be done. I know that planning until 90 is generous (given that life expectancy in Canada is 82), and some seniors are comfortable living on about $40,000 or even less each year (especially if they’ve already paid off their mortgage!).