One in five Canadians don’t know how much they’ll need to retire

We all dream about the day we can finally drop work and live the good life, but first we need to save for it. Finder’s survey of 1,200 people reveals Canadians think they’ll need a whopping $2.27 million for their retirement. So do Canadians really need to stash away that much cash? And what do recent changes to the CPP mean for their retirement plans? Let’s take a closer look.

How much do Canadians think they’ll need for retirement?

On average, Canadians think they’ll need a whopping $2.27 million for their retirement. Those in the Prairie Provinces think they’ll need the most, at $2.63 million. West Coasters think they’ll need the least, at $1.94 million.

Women think they’ll need more than men do. On average, women predict they’ll need $2.4 million for their retirement years, while men say they’ll need $2.13 million.

Canadians aged 18-24 actually believe they’d need to save the least for retirement. Canadians in this age group think they’ll need $2 million, while those aged 35-44 think they’d need the most of all, at $2.6 million.

When asked whether Canadians are overestimating how much they need, Financial Planner and Managing Director at Objective Financial Partners Inc, Jason Heath, said the average figure is much higher than other studies he’s seen but the biggest problem with retirement planning and rules of thumb is that everyone is different.

I would focus less on averages and more on personal circumstances. Retirement planning should be a very selfish exercise – one that focuses more on your own situation and ignores your neighbour or brother-in-law’s opinions. Averages can be really deceiving without context. Retirees and those approaching retirement would be well served to consider working with a professional financial planner at least once to develop a plan for funding their retirement. – Jason Heath, Financial Planner and Managing Director, Objective Financial Partners Inc.

And what about those who just don’t know? There are plenty of those, too. Finder’s survey found 23% of Canadians have no idea how much they’ll need to save for retirement. Shockingly, almost a third (30%) of those aged 65+ said they were unsure how much they’d need, with over a quarter (27%) of 55-64 year olds saying the same.

While it might seem shocking that 23% don’t know what they need to retire Heath said he’s actually more surprised that 77% of Canadians do know how much they’ll need.

Changes to your retirement savings

Some of the main ways people save for their retirement are through a Registered Retirement Savings Plan and via the Canada Pension Plan (CPP). Changes to the CPP mean the amount we contribute is changing, but Finder’s survey reveals over a quarter of Canadians (26%) don’t know about the changes. Men are more likely than women to stay across them – 18% of men say they aren’t aware of the changes compared to a whopping 34% of women.

Those aged 25-34 are least likely to be across the changes, with just over 30% saying they aren’t aware. This is compared to 28% of 55-64 year olds, 27% of 45-54 year olds and 26% of 18-24 year olds. Canadians aged 65 and over are most likely to be aware of the changes, with just 20% saying they didn’t know about them.

What do Canadians really think about changes to CPP?

While changes to the CPP sound great on paper (who doesn’t want more money for their retirement?), not all Canadians are feeling optimistic about them. In fact, over a fifth of Canadian adults (23%) don’t think they will benefit from changes to the CPP.

One of the biggest concerns Canadians have is that if people are contributing more money to their CPP, they’ll be contributing less to other forms of savings. In fact, 18% think increasing CPP premiums will result in less private savings. Men are more likely to think so, with 21% of men believing they’ll have less cash for their private savings, compared to just 16% of women.

Another prime concern for Canadians is that they’ll receive smaller paycheques. 24% of Canadian adults say they’re concerned they’ll be taking home a smaller paycheque after the changes take place. 18% think employers will deal with the rising cost of contributions by lowering wages. Again, men were more likely to think this, at 20% of men compared to 15% of women.

Heath says he thinks most of the concerns are unwarranted.

The Chief Actuary of Canada audits the CPP every 3 years to assess the financial stability of the plan. The most recent assessment found that CPP is projected to be viable for the next 75 years. The CPP is also managed without political interference and cannot be raided by the government. Probably the biggest myth is that CPP and the corresponding Old Age Security (OAS) government pensions will be sufficient to fund retirement for Canadians. Most Canadians will need to have some additional private savings. CPP and OAS are a good start, but they are just the beginning of a retirement strategy for most Canadians. – Jason Heath, Financial Planner and Managing Director, Objective Financial Partners Inc.

How much do I really need to save for retirement?

Everyone’s retirement savings will look different. Some financial planners say $1,000,000 is the golden figure, but it seems most Canadians think they’ll need more than double that amount.

The amount you’ll need to save is dependent on things like the lifestyle you’re hoping to have in retirement, housing affordability where you live and the cost of living. To help figure out how much you’ll need, you might consider getting a financial planner to plan for your retirement.