What to know
- A new BMO survey finds Canadians are setting higher retirement savings targets, but 36% say they’re unlikely to reach them as living costs and economic uncertainty grow.
- Toronto residents say affordability — especially housing — is making retirement planning harder, even despite aggressive saving.
- The average Canadian estimates needing $1.7 million to retire comfortably, while some Toronto residents say they’d need closer to $3 million or expect to keep working.
Canadians are setting “ambitious” retirement savings goals despite feeling less confident they’ll achieve them, according to a new Bank of Montreal (BMO) survey.
The Annual Retirement Survey found that 36 per cent of respondents believe they are unlikely to reach their personal retirement target – which BMO says indicates “growing uncertainty about the future as rising costs and economic concerns challenge long-term finance planning goals.”
Are Torontonians prepared for retirement?
Alison, whose retirement funds are managed by Manulife, says all she knows about her retirement is that she is on the right track.
“You put in the goals, what your income is, what year you want to retire, and they give you a projection of how much you need to be contributing,” she tells Now Toronto.
“Deciding how much to save for retirement is a personal choice … but thinking in percentage terms can help with long term planning, so someone in their 20s contributing 10 per cent a month to an RRSP can be a great start,” Margaret Leong, senior investment counsellor at BMO, said in the survey findings.
But according to some Toronto residents, the city’s affordability (or lack thereof) means that’s not enough.
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For instance, Michal – who dedicates close to 30 per cent of his earned income to savings – is not too confident about his retirement plans.
“I try my best to save, but it feels like I’m climbing an uphill battle, to be honest,” he tells Now Toronto.
Michal says he does not know how much money he would need to save up before retirement because of the constantly fluctuating economic uncertainties.
The high cost of living in Toronto is also prompting some to consider retiring somewhere more affordable.
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“If I retired in another place where it’s more affordable, I don’t think I would need as much money,” Clayton tells Now Toronto.
For some, retirement is not even on the radar.
“The scary part is buying a house,” Elliot tells Now Toronto. “If you save all this, and buy a house, you have nothing. You can clear all [your savings] to buy a house and you’re back at zero.”
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According to the BMO survey, the average Canadian believes they need $1.7 million to retire comfortably – that’s a 10.7 per cent increase from the previous year.
The savings goal varies significantly across provinces, with British Columbians estimating they need over $2 million to retire comfortably – more than double the estimates by those in Atlantic Provinces of $928,000. Ontario sits at the second-highest, with $1.9 million.
How much do Torontonians think they need to retire comfortably?
“$3 million, if I were to retire in Toronto,” Clayton says.
“It’s gotta be enough that if I were to put it into an index fund that yields a seven per cent annual return, it should be enough to cover half of my living expenses,” Matt, a 23-year-old software engineer, tells Now Toronto.
“$10 million,” Marla tells Now Toronto, half jokingly.
However, Marla says she plans to “work until the day [she] dies,” as she believes working keeps her feeling young. In fact, of the respondents who had not retired, 27 per cent said they do not plan to stop working.
“An increasing number of people say they plan to never retire, which often means they don’t want to stop working entirely,” BMO Nesbitt Burns Senior Portfolio Manager Catherine Laurin said in the survey. “For many, retirement includes part-time work, freelancing, or passion projects.”
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BMO offers tips for retirement planning
For Canadians looking to maximize their retirement planning, BMO offers the following tips:
- Start planning early: Define objectives and long-term financial goals to find the right places to invest your money.
- Practice discipline: Manage your money by reviewing budgets and treating savings as a regular expense
- Contribute securities to an RRSP
- Seek professional advice: Advisors can help tailor your retirement plan to your financial situation and help assess your risk tolerance.
