How much should you save for retirement in Ottawa?

Retirement Saving

How much should I save for retirement?

How much should you save for retirement in Ottawa?

Many of you are probably wondering how much you should save. Maybe $500,000? Maybe $1,000,000? Maybe more? To be completely honest, I really don’t know. But, if I was to give an answer, I would say it’s probably more than you think.

Food for Thought

Here are few things to ponder. A recent poll stated that “the average working household has virtually no retirement savings” and that “the hope of retirement security is out of reach for many Canadians.” The study also notes that the average Canadian family has a median retirement balance of just $3,000 (this amount includes households with and without retirement accounts). It also mentions that 38.3 million working-age households don’t have any assets in retirement accounts at all—that’s nearly 45 percent of the working population!
Another thing to think about: the median balance for those nearing retirement and who have retirement accounts, is $100,000—definitely not a bad pile of money to be sitting on. But keep in mind, retirement savings have to last over the long haul. You might live 20, 30 or even 40 years past retirement. If you applied the traditionally-recommended strategy of withdrawing 4 percent per year (or $4,000, to begin with) you would only produce a couple hundred dollars of income per month. And if that money is withdrawn from a tax-deferred account such as an RRSP, don’t forget that you must pay taxes on it too.

Recommended Savings Targets

Now, while I won’t personally gander a guess as to how much you should save, the friendly people over at Fidelity Investments will. They have come up with incremental savings targets for you to strive for throughout your working life.
There are a couple of takeaways from their savings targets. First, by the time you are 35, you should have saved at least the equivalent of your current income. Or, in other words, if you are making $60,000 per year at age 35, you should have $60,000 saved as well. From then on, every 5 years you should have an additional multiple of your current income saved (i.e. twice as much at 40, 3 times as much at 45 and so on). At age 67, you should finish with 8 times your income. Consulting firm Aon Hewitt provides an even higher benchmark for workers to hit. They suggest that by age 65 you should have saved 11 times your income.

Conclusion

Even if you reach these targets before your selected retirement age, you should still continue saving. These targets shouldn’t be viewed as a finish line, but merely as loose guidelines. And, if on the awful chance you might exceed these benchmarks, your retirement will be just that much more stable and enjoyable.